UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission File Number: 1-12675 (Kilroy Realty Corporation)
Commission File Number: 000-54005 (Kilroy Realty, L.P.)
KILROY REALTY CORPORATION
KILROY REALTY, L.P.
(Exact name of registrant as specified in its charter)
 
 
 
Kilroy Realty Corporation
Maryland
95-4598246
 
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
 
Kilroy Realty, L.P.
Delaware
95-4612685
 
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
 
12200 W. Olympic Boulevard, Suite 200, Los Angeles, California 90064
(Address of principal executive offices) (Zip Code)
 
(310) 481-8400
(Registrant's telephone number, including area code)
 
 
 
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Kilroy Realty Corporation    Yes   þ     No   o
Kilroy Realty, L.P.         Yes   þ     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
Kilroy Realty Corporation     Yes   þ     No   o
Kilroy Realty, L.P.         Yes   þ     No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Kilroy Realty Corporation
 
 
 
Large accelerated filer     þ
Accelerated filer     o  
Non-accelerated filer     o  (Do not check if a smaller reporting company)
Smaller reporting company     o
Emerging growth company    o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
 
 
 
Kilroy Realty, L.P.
 
 
 
Large accelerated filer     o
Accelerated filer     o  
Non-accelerated filer     þ  (Do not check if a smaller reporting company)
Smaller reporting company     o
Emerging growth company    o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Kilroy Realty Corporation Yes   o     No   þ
Kilroy Realty, L.P. Yes   o     No   þ
As of July 21, 2017 , 98,364,989 shares of Kilroy Realty Corporation common stock, par value $.01 per share, were outstanding.
 


EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2017 of Kilroy Realty Corporation and Kilroy Realty, L.P. Unless stated otherwise or the context otherwise requires, references to “Kilroy Realty Corporation” or the “Company,” “we,” “our,” and “us” mean Kilroy Realty Corporation, a Maryland corporation, and its controlled and consolidated subsidiaries, and references to “Kilroy Realty, L.P.” or the “Operating Partnership” mean Kilroy Realty, L.P., a Delaware limited partnership and its controlled and consolidated subsidiaries.
The Company is a real estate investment trust, or REIT, and the general partner of the Operating Partnership. As of June 30, 2017 , the Company owned an approximate 97.9% common general partnership interest in the Operating Partnership. The remaining approximate 2.1% common limited partnership interests are owned by non-affiliated investors and certain directors and officers of the Company. As the sole general partner of the Operating Partnership, the Company exercises exclusive and complete discretion over the Operating Partnership’s day-to-day management and control and can cause it to enter into certain major transactions, including acquisitions, dispositions and refinancings, and cause changes in its line of business, capital structure and distribution policies.
There are a few differences between the Company and the Operating Partnership that are reflected in the disclosures in this Form 10-Q. We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated, consolidated company. The Company is a REIT, the only material asset of which is the partnership interests it holds in the Operating Partnership. As a result, the Company generally does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing equity from time to time and guaranteeing certain debt of the Operating Partnership. The Company itself is not directly obligated under any indebtedness, but guarantees some of the debt of the Operating Partnership. The Operating Partnership owns substantially all of the assets of the Company either directly or through its subsidiaries, conducts the operations of the Company’s business and is structured as a limited partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Company, which the Company generally contributes to the Operating Partnership in exchange for units of partnership interest, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness or through the issuance of units of partnership interest.
Noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The common limited partnership interests in the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s financial statements and, to the extent not held by the Company, as noncontrolling interests in the Company’s financial statements. The Operating Partnership’s financial statements reflect the noncontrolling interest in Kilroy Realty Finance Partnership, L.P., a Delaware limited partnership (the “Finance Partnership”). This noncontrolling interest represents the Company’s 1% indirect general partnership interest in the Finance Partnership, which is directly held by Kilroy Realty Finance, Inc., a wholly owned subsidiary of the Company. The differences between noncontrolling interests, stockholders’ equity and partners’ capital result from the differences in the equity issued by the Company and the Operating Partnership, and in the Operating Partnership’s noncontrolling interest in the Finance Partnership.
We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:
•
Combined reports better reflect how management and the analyst community view the business as a single operating unit;
•
Combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;
•
Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and
•
Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.
To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:
•
consolidated financial statements;
•
the following notes to the consolidated financial statements:
◦
Note 7, Stockholders’ Equity of the Company;
◦
Note 8, Partners’ Capital of the Operating Partnership;

i

◦
Note 12, Net Income Available to Common Stockholders Per Share of the Company;
◦
Note 13, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;
◦
Note 14, Supplemental Cash Flow Information of the Company; and
◦
Note 15, Supplemental Cash Flow Information of the Operating Partnership;
•
“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
◦
—Liquidity and Capital Resources of the Company;” and
◦
—Liquidity and Capital Resources of the Operating Partnership.”
This report also includes separate sections under Part I, Item 4. Controls and Procedures and separate Exhibit 31 and Exhibit 32 certifications for the Company and the Operating Partnership to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.


ii

KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
QUARTERLY REPORT FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017
TABLE OF CONTENTS
 
 
 
 
Page
 
 
PART I – FINANCIAL INFORMATION
 
Item 1.
 
 
 
 
  
 
  
 
  
Item 1.
 
 
 
 
 
 
 
 
 
 
 
Item 2.
  
Item 3.
 
Item 4.
 
 
 
PART II – OTHER INFORMATION
 
Item 1.
 
Item 1A.
 
Item 2.
 
Item 3.
 
Item 4.
 
Item 5.
 
Item 6.
 
 



PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) OF KILROY REALTY CORPORATION

KILROY REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
June 30, 2017
 
December 31, 2016
ASSETS
(unaudited)
 
 
REAL ESTATE ASSETS:
 
 
 
Land and improvements
$
1,108,971

 
$
1,108,971

Buildings and improvements
4,983,638

 
4,938,250

Undeveloped land and construction in progress
1,183,618

 
1,013,533

Total real estate assets held for investment
7,276,227

 
7,060,754

Accumulated depreciation and amortization
(1,234,079
)
 
(1,139,853
)
Total real estate assets held for investment, net
6,042,148

 
5,920,901

REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET
—

 
9,417

CASH AND CASH EQUIVALENTS
387,616

 
193,418

RESTRICTED CASH
8,249

 
56,711

MARKETABLE SECURITIES (Note 11)
16,010

 
14,773

CURRENT RECEIVABLES, NET (Note 3)
13,703

 
13,460

DEFERRED RENT RECEIVABLES, NET (Note 3)
233,427

 
218,977

DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET
195,320

 
208,368

PREPAID EXPENSES AND OTHER ASSETS, NET (Note 4)
98,894

 
70,608

TOTAL ASSETS
$
6,995,367

 
$
6,706,633

LIABILITIES AND EQUITY
 
 
 
LIABILITIES:
 
 
 
Secured debt, net (Notes 5 and 11)
$
467,758

 
$
472,772

Unsecured debt, net (Notes 5 and 11)
2,097,083

 
1,847,351

Accounts payable, accrued expenses and other liabilities
219,483

 
202,391

Accrued dividends and distributions (Note 16)
44,105

 
222,306

Deferred revenue and acquisition-related intangible liabilities, net
148,729

 
150,360

Rents received in advance and tenant security deposits
55,738

 
52,080

Liabilities of real estate assets held for sale
—

 
56

Total liabilities
3,032,896

 
2,947,316

COMMITMENTS AND CONTINGENCIES (Note 10)

 

EQUITY:
 
 
 
Stockholders’ Equity (Note 7):
 
 
 
Preferred stock, $.01 par value, 30,000,000 shares authorized:
 
 
 
6.875% Series G Cumulative Redeemable Preferred stock, $.01 par value, no shares issued and outstanding at 6/30/2017, and 4,000,000 shares authorized, issued and outstanding ($100,000 liquidation preference) at 12/31/2016
—

 
96,155

6.375% Series H Cumulative Redeemable Preferred stock, $.01 par value, 4,000,000 shares authorized, issued and outstanding ($100,000 liquidation preference) (Note 16)
96,256

 
96,256

Common stock, $.01 par value, 150,000,000 shares authorized, 98,351,217 and 93,219,439 shares issued and outstanding, respectively
984

 
932

Additional paid-in capital
3,792,028

 
3,457,649

Distributions in excess of earnings
(132,799
)
 
(107,997
)
Total stockholders’ equity
3,756,469

 
3,542,995

Noncontrolling Interests:
 
 
 
Common units of the Operating Partnership (Note 6)
77,296

 
85,590

Noncontrolling interests in consolidated property partnerships (Note 1)
128,706

 
130,732

Total noncontrolling interests
206,002

 
216,322

Total equity
3,962,471

 
3,759,317

TOTAL LIABILITIES AND EQUITY
$
6,995,367

 
$
6,706,633



See accompanying notes to consolidated financial statements.

1

KILROY REALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except share and per share data)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
REVENUES
 
 
 
 
 
 
 
Rental income
$
158,925

 
$
143,653

 
$
315,573

 
$
277,408

Tenant reimbursements
19,267

 
16,138

 
38,563

 
27,542

Other property income
2,406

 
342

 
5,770

 
629

Total revenues
180,598

 
160,133

 
359,906

 
305,579

EXPENSES
 
 
 
 
 
 
 
Property expenses
33,304

 
29,221

 
64,545

 
55,186

Real estate taxes
16,543

 
13,845

 
34,507

 
24,877

Provision for bad debts
409

 
—

 
1,707

 
—

Ground leases
1,547

 
768

 
3,189

 
1,597

General and administrative expenses
14,303

 
13,979

 
29,236

 
27,416

Acquisition-related expenses (Note 1)
—

 
714

 
—

 
776

Depreciation and amortization
62,251

 
53,346

 
123,170

 
103,786

Total expenses
128,357

 
111,873

 
256,354

 
213,638

OTHER (EXPENSES) INCOME
 
 
 
 
 
 
 
Interest income and other net investment gains (Note 11)
1,038

 
311

 
2,103

 
582

Interest expense (Note 5)
(17,973
)
 
(14,384
)
 
(35,325
)
 
(26,213
)
Total other (expenses) income
(16,935
)
 
(14,073
)
 
(33,222
)
 
(25,631
)
INCOME FROM OPERATIONS BEFORE GAINS (LOSS) ON SALES OF REAL ESTATE
35,306

 
34,187

 
70,330

 
66,310

Net loss on sale of land
—

 
(295
)
 
—

 
(295
)
Gains on sales of depreciable operating properties (Note 2)
—

 
—

 
2,257

 
145,990

NET INCOME
35,306

 
33,892

 
72,587

 
212,005

Net income attributable to noncontrolling common units of the Operating Partnership (Note 6)
(616
)
 
(829
)
 
(1,239
)
 
(4,439
)
Net income attributable to noncontrolling interests in consolidated property partnerships
(3,242
)
 
(216
)
 
(6,375
)
 
(411
)
Total income attributable to noncontrolling interests
(3,858
)
 
(1,045
)
 
(7,614
)
 
(4,850
)
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION
31,448

 
32,847

 
64,973

 
207,155

Preferred dividends
(1,615
)
 
(3,312
)
 
(4,966
)
 
(6,625
)
Original issuance costs of redeemed preferred stock and preferred units
(Note 7)
—

 
—

 
(3,845
)
 
—

Total preferred dividends
(1,615
)
 
(3,312
)
 
(8,811
)
 
(6,625
)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
$
29,833

 
$
29,535

 
$
56,162

 
$
200,530

Net income available to common stockholders per share – basic (Note 12)
$
0.30

 
$
0.32

 
$
0.56

 
$
2.17

Net income available to common stockholders per share – diluted (Note 12)
$
0.30

 
$
0.31

 
$
0.56

 
$
2.15

Weighted average common shares outstanding – basic (Note 12)
98,275,471

 
92,209,955

 
97,834,255

 
92,217,238

Weighted average common shares outstanding – diluted (Note 12)
98,827,378

 
92,824,786

 
98,427,345

 
92,784,065

Dividends declared per common share
$
0.425

 
$
0.375

 
$
0.800

 
$
0.725














See accompanying notes to consolidated financial statements.

2

KILROY REALTY CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in thousands, except share and per share/unit data)
 
 
 
 
Common Stock
 
Total
Stock-
holders’
Equity
 
Noncontrolling Interests
 
Total
Equity
 
Preferred
Stock
 
Number of
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Distributions
in Excess of
Earnings
 
BALANCE AS OF DECEMBER 31, 2015
$
192,411

 
92,258,690

 
$
923

 
$
3,047,894

 
$
(70,262
)
 
$
3,170,966

 
$
63,620

 
$
3,234,586

Net income
 
 
 
 
 
 
 
 
207,155

 
207,155

 
4,850

 
212,005

Issuance of share-based compensation awards
 
 
 
 
 
 
853

 
 
 
853

 
 
 
853

Non-cash amortization of share-based compensation
 
 
 
 
 
 
12,538

 
 
 
12,538

 
 
 
12,538

Exercise of stock options
 
 
22,000

 
 
 
937

 
 
 
937

 
 
 
937

Repurchase of common stock, stock options and restricted stock units
 
 
(96,360
)
 
(1
)
 
(5,882
)
 
 
 
(5,883
)
 
 
 
(5,883
)
Settlement of restricted stock units for shares of common stock
 
 
69,238

 
1

 
(1
)
 
 
 
—

 
 
 
—

Issuance of common units in connection with acquisition
 
 
 
 
 
 
 
 
 
 
 
 
48,033

 
48,033

Exchange of common units of the Operating Partnership
 
 
1,200

 
 
 
39

 
 
 
39

 
(39
)
 
—

Adjustment for noncontrolling interest
 
 
 
 
 
 
18,130

 
 
 
18,130

 
(18,130
)
 
—

Distributions to noncontrolling interests in consolidated property partnerships
 
 
 
 
 
 
 
 
 
 
 
 
(281
)
 
(281
)
Preferred dividends
 
 
 
 
 
 
 
 
(6,625
)
 
(6,625
)
 
 
 
(6,625
)
Dividends declared per common share and common unit ($0.725 per share/unit)
 
 
 
 
 
 
 
 
(67,621
)
 
(67,621
)
 
(1,908
)
 
(69,529
)
BALANCE AS OF JUNE 30, 2016
$
192,411

 
92,254,768

 
$
923

 
$
3,074,508

 
$
62,647

 
$
3,330,489

 
$
96,145

 
$
3,426,634

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
Common Stock
 
Total
Stock-
holders’
Equity
 
Noncontrolling Interests
 
Total
Equity
 
Preferred
Stock
 
Number of
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Distributions
in Excess of
Earnings
BALANCE AS OF DECEMBER 31, 2016
$
192,411

 
93,219,439

 
$
932

 
$
3,457,649

 
$
(107,997
)
 
$
3,542,995

 
$
216,322

 
$
3,759,317

Net income
 
 
 
 
 
 
 
 
64,973

 
64,973

 
7,614

 
72,587

Redemption of Series G preferred stock (Note 7)
(96,155
)
 
 
 
 
 
 
 
(3,845
)
 
(100,000
)
 
 
 
(100,000
)
Issuance of common stock (Note 7)
 
 
4,427,500

 
44

 
308,788

 
 
 
308,832

 
 
 
308,832

Issuance of share-based compensation awards
 
 

 
 
 
4,691

 
 
 
4,691

 
 
 
4,691

Non-cash amortization of share-based compensation
 
 
 
 
 
 
12,628

 
 
 
12,628

 
 
 
12,628

Exercise of stock options (Note 9)
 
 
272,000

 
4

 
12,047

 
 
 
12,051

 
 
 
12,051

Settlement of restricted stock units for shares of common stock
 
 
278,057

 
3

 
(3
)
 
 
 
—

 
 
 
—

Repurchase of common stock, stock options and restricted stock units
 
 
(150,129
)
 
(2
)
 
(11,640
)
 
 
 
(11,642
)
 
 
 
(11,642
)
Exchange of common units of the Operating Partnership
 
 
304,350

 
3

 
10,936

 
 
 
10,939

 
(10,939
)
 
—

Contributions from noncontrolling interests in consolidated property partnerships
 
 
 
 
 
 
 
 
 
 
—

 
250

 
250

Distributions to noncontrolling interests in consolidated property partnerships
 
 
 
 
 
 
 
 
 
 
—

 
(8,651
)
 
(8,651
)
Adjustment for noncontrolling interest
 
 
 
 
 
 
(3,068
)
 
 
 
(3,068
)
 
3,068

 
—

Preferred dividends
 
 
 
 
 
 
 
 
(4,966
)
 
(4,966
)
 
 
 
(4,966
)
Dividends declared per common share and common unit ($0.800 per share/unit)
 
 
 
 
 
 
 
 
(80,964
)
 
(80,964
)
 
(1,662
)
 
(82,626
)
BALANCE AS OF JUNE 30, 2017
$
96,256

 
98,351,217

 
$
984

 
$
3,792,028

 
$
(132,799
)
 
$
3,756,469

 
$
206,002

 
$
3,962,471



See accompanying notes to consolidated financial statements.

3

KILROY REALTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
( Unaudited; in thousands)
 
 
Six Months Ended June 30,
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
72,587

 
$
212,005

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of real estate assets and leasing costs
120,734

 
102,127

Depreciation of non-real estate furniture, fixtures and equipment
2,436

 
1,659

Increase in provision for bad debts (Note 3)
1,707

 
—

Non-cash amortization of share-based compensation awards
8,966

 
10,034

Non-cash amortization of deferred financing costs and debt discounts and premiums
1,469

 
1,306

Non-cash amortization of net below market rents
(3,603
)
 
(3,243
)
Gains on sales of depreciable operating properties (Note 2)
(2,257
)
 
(145,990
)
Loss on sale of land
—

 
295

Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
(8,243
)
 
(6,100
)
Straight-line rents
(15,537
)
 
(18,537
)
Net change in other operating assets
(7,418
)
 
(6,071
)
Net change in other operating liabilities
7,575

 
(9,856
)
Net cash provided by operating activities
178,416

 
137,629

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Expenditures for development properties and undeveloped land
(161,045
)
 
(162,122
)
Expenditures for operating properties and other capital assets
(40,738
)
 
(65,543
)
Expenditures for acquisition of operating properties
—

 
(55,415
)
Expenditures for acquisition of undeveloped land
—

 
(33,513
)
Net proceeds received from dispositions (Note 2)
11,865

 
276,622

(Increase) decrease in acquisition-related deposits
(26,100
)
 
1,902

Increase in note receivable
—

 
(1,000
)
Net cash used in investing activities
(216,018
)
 
(39,069
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net proceeds from issuance of common stock (Note 7)
308,832

 
—

Redemption of Series G preferred stock (Note 7)
(100,000
)
 
—

Proceeds from the issuance of unsecured debt (Note 5)
250,000

 
—

Borrowings on unsecured revolving credit facility
—

 
270,000

Repayments on unsecured revolving credit facility
—

 
(50,000
)
Principal payments on secured debt
(4,213
)
 
(4,808
)
Financing costs
(2,191
)
 
(679
)
Repurchase of common stock and restricted stock units
(11,642
)
 
(5,883
)
Proceeds from exercise of stock options
12,051

 
937

Contributions from noncontrolling interests in consolidated property partnerships
250

 
—

Distributions to noncontrolling interests in consolidated property partnerships
(8,651
)
 
(281
)
Dividends and distributions paid to common stockholders and common unitholders
(255,292
)
 
(65,935
)
Dividends and distributions paid to preferred stockholders and preferred unitholders
(5,806
)
 
(6,625
)
Net cash provided by financing activities
183,338

 
136,726

Net increase in cash and cash equivalents and restricted cash
145,736

 
235,286

Cash and cash equivalents and restricted cash, beginning of period
250,129

 
57,204

Cash and cash equivalents and restricted cash, end of period
$
395,865

 
$
292,490






See accompanying notes to consolidated financial statements.

4




ITEM 1: FINANCIAL STATEMENTS (UNAUDITED) OF KILROY REALTY, L.P.

KILROY REALTY, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
 
 
June 30, 2017
 
December 31, 2016
ASSETS  
(unaudited)
 
 
REAL ESTATE ASSETS:
 
 
 
Land and improvements
$
1,108,971

 
$
1,108,971

Buildings and improvements
4,983,638

 
4,938,250

Undeveloped land and construction in progress
1,183,618

 
1,013,533

Total real estate assets held for investment
7,276,227

 
7,060,754

Accumulated depreciation and amortization
(1,234,079
)
 
(1,139,853
)
Total real estate assets held for investment, net
6,042,148

 
5,920,901

REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET
—

 
9,417

CASH AND CASH EQUIVALENTS
387,616

 
193,418

RESTRICTED CASH
8,249

 
56,711

MARKETABLE SECURITIES (Note 11)
16,010

 
14,773

CURRENT RECEIVABLES, NET (Note 3)
13,703

 
13,460

DEFERRED RENT RECEIVABLES, NET (Note 3)
233,427

 
218,977

DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET
195,320

 
208,368

PREPAID EXPENSES AND OTHER ASSETS, NET (Note 4)
98,894

 
70,608

TOTAL ASSETS
$
6,995,367

 
$
6,706,633

LIABILITIES AND CAPITAL
 
 
 
LIABILITIES:
 
 
 
Secured debt, net (Notes 5 and 11)
$
467,758

 
$
472,772

Unsecured debt, net (Notes 5 and 11)
2,097,083

 
1,847,351

Accounts payable, accrued expenses and other liabilities
219,483

 
202,391

Accrued distributions (Note 16)
44,105

 
222,306

Deferred revenue and acquisition-related intangible liabilities, net
148,729

 
150,360

Rents received in advance and tenant security deposits
55,738

 
52,080

Liabilities of real estate assets held for sale
—

 
56

Total liabilities
3,032,896

 
2,947,316

COMMITMENTS AND CONTINGENCIES (Note 10)

 

CAPITAL:
 
 
 
Partners’ Capital (Note 8):
 
 
 
6.875% Series G Cumulative Redeemable Preferred units, no units issued and outstanding at 6/30/2017, 4,000,000 units issued and outstanding ($100,000 liquidation preference) at 12/31/2016
—

 
96,155

6.375% Series H Cumulative Redeemable Preferred units, 4,000,000 units issued and
outstanding ($100,000 liquidation preference) (Note 16)
96,256

 
96,256

Common units, 98,351,217 and 93,219,439 held by the general partner and 2,077,193 and 2,381,543
held by common limited partners issued and outstanding, respectively
3,732,916


3,431,768

Total partners’ capital
3,829,172

 
3,624,179

Noncontrolling interests in consolidated property partnerships and subsidiaries (Note 1)
133,299


135,138

Total capital
3,962,471


3,759,317

TOTAL LIABILITIES AND CAPITAL
$
6,995,367


$
6,706,633








See accompanying notes to consolidated financial statements.

5

KILROY REALTY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
( Unaudited; in thousands, except unit and per unit data)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
REVENUES
 
 
 
 
 
 
 
Rental income
$
158,925

 
$
143,653

 
$
315,573

 
$
277,408

Tenant reimbursements
19,267

 
16,138

 
38,563

 
27,542

Other property income
2,406

 
342

 
5,770

 
629

Total revenues
180,598

 
160,133

 
359,906

 
305,579

EXPENSES
 
 
 
 
 
 
 
Property expenses
33,304

 
29,221

 
64,545

 
55,186

Real estate taxes
16,543

 
13,845

 
34,507

 
24,877

Provision for bad debts
409

 
—

 
1,707

 
—

Ground leases
1,547

 
768

 
3,189

 
1,597

General and administrative expenses
14,303

 
13,979

 
29,236

 
27,416

Acquisition-related expenses (Note 1)
—

 
714

 
—

 
776

Depreciation and amortization
62,251

 
53,346

 
123,170

 
103,786

Total expenses
128,357

 
111,873

 
256,354

 
213,638

OTHER (EXPENSES) INCOME
 
 
 
 
 
 
 
Interest income and other net investment gains (Note 11)
1,038

 
311

 
2,103

 
582

Interest expense (Note 5)
(17,973
)
 
(14,384
)
 
(35,325
)
 
(26,213
)
Total other (expenses) income
(16,935
)
 
(14,073
)
 
(33,222
)
 
(25,631
)
INCOME FROM OPERATIONS BEFORE GAINS (LOSS) ON SALES OF REAL ESTATE
35,306

 
34,187

 
70,330

 
66,310

Net loss on sale of land
—

 
(295
)
 
—

 
(295
)
Gains on sales of depreciable operating properties (Note 2)
—

 
—

 
2,257

 
145,990

NET INCOME
35,306

 
33,892

 
72,587

 
212,005

Net income attributable to noncontrolling interests in consolidated property partnerships and subsidiaries
(3,335
)
 
(302
)
 
(6,562
)
 
(582
)
NET INCOME ATTRIBUTABLE TO KILROY REALTY, L.P.
31,971

 
33,590

 
66,025

 
211,423

Preferred distributions
(1,615
)
 
(3,312
)
 
(4,966
)
 
(6,625
)
Original issuance costs of redeemed preferred units (Note 8)
—

 
—

 
(3,845
)
 
—

Total preferred dividends
(1,615
)
 
(3,312
)
 
(8,811
)
 
(6,625
)
NET INCOME AVAILABLE TO COMMON UNITHOLDERS
$
30,356

 
$
30,278

 
$
57,214

 
$
204,798

Net income available to common unitholders per unit – basic (Note 13)
$
0.30

 
$
0.31

 
$
0.56

 
$
2.16

Net income available to common unitholders per unit – diluted (Note 13)
$
0.30

 
$
0.31

 
$
0.56

 
$
2.15

Weighted average common units outstanding – basic (Note 13)
100,352,664

 
94,841,231

 
100,024,000

 
94,514,876

Weighted average common units outstanding – diluted (Note 13)
100,904,571

 
95,456,062

 
100,617,090

 
95,081,703

Dividends declared per common unit
$
0.425

 
$
0.375

 
$
0.800

 
$
0.725

















See accompanying notes to consolidated financial statements.

6

KILROY REALTY, L.P.
CONSOLIDATED STATEMENTS OF CAPITAL
(Unaudited; in thousands, except unit and per unit data)
 
 
Partners’ Capital
 
Total
Partners’  
Capital
 
Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries
 
 
 
Preferred
Units
 
Number of
Common
Units
 
Common
Units
 
 
 
Total
Capital
BALANCE AS OF DECEMBER 31, 2015
$
192,411

 
94,023,465

 
$
3,031,609

 
$
3,224,020

 
$
10,566

 
$
3,234,586

Net income
 
 
 
 
211,423

 
211,423

 
582

 
212,005

Issuance of common units in connection with acquisition
 
 
867,701

 
48,033

 
48,033

 
 
 
48,033

Issuance of share-based compensation awards
 
 
 
 
853

 
853

 
 
 
853

Non-cash amortization of share-based compensation
 
 
 
 
12,538

 
12,538

 
 
 
12,538

Exercise of stock options
 
 
22,000

 
937

 
937

 
 
 
937

Repurchase of common units, stock options and restricted stock units
 
 
(96,360
)
 
(5,883
)
 
(5,883
)
 
 
 
(5,883
)
Settlement of restricted stock units
 
 
69,238

 
—

 
—

 
 
 
—

Distributions to noncontrolling interests in consolidated
property partnerships
 
 
 
 
 
 
 
 
(281
)
 
(281
)
Preferred distributions
 
 
 
 
(6,625
)
 
(6,625
)
 
 
 
(6,625
)
Distributions declared per common unit ($0.725 per unit)
 
 
 
 
(69,529
)
 
(69,529
)
 
 
 
(69,529
)
BALANCE AS OF JUNE 30, 2016
$
192,411

 
94,886,044

 
$
3,223,356

 
$
3,415,767

 
$
10,867

 
$
3,426,634

 
 
 
 
 
 
 
 
 
 
 
 




 
Partners’ Capital
 
Total
Partners’  
Capital
 
Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries
 
 
 
Preferred
Units
 
Number of
Common
Units
 
Common
Units
 
 
Total
Capital
BALANCE AS OF DECEMBER 31, 2016
$
192,411

 
95,600,982

 
$
3,431,768

 
$
3,624,179

 
$
135,138

 
$
3,759,317

Net income
 
 
 
 
66,025

 
66,025

 
6,562

 
72,587

Redemption of Series G preferred units (Note 8)
(96,155
)
 
 
 
(3,845
)
 
(100,000
)
 
 
 
(100,000
)
Issuance of common units (Note 8)
 
 
4,427,500

 
308,832

 
308,832

 
 
 
308,832

Issuance of share-based compensation awards
 
 
 
 
4,691

 
4,691

 
 
 
4,691

Non-cash amortization of share-based compensation
 
 
 
 
12,628

 
12,628

 
 
 
12,628

Exercise of stock options (Note 9)
 
 
272,000

 
12,051

 
12,051

 
 
 
12,051

Settlement of restricted stock units
 
 
278,057

 
—

 
—

 
 
 
—

Repurchase of common units, stock options and restricted stock units
 
 
(150,129
)
 
(11,642
)
 
(11,642
)
 
 
 
(11,642
)
Contributions from noncontrolling interests in consolidated property partnerships
 
 
 
 


 


 
250

 
250

Distributions to noncontrolling interests in consolidated property partnerships
 
 
 
 
 
 


 
(8,651
)
 
(8,651
)
Preferred distributions
 
 
 
 
(4,966
)
 
(4,966
)
 
 
 
(4,966
)
Distributions declared per common unit ($0.800 per unit)
 
 
 
 
(82,626
)
 
(82,626
)
 
 
 
(82,626
)
BALANCE AS OF JUNE 30, 2017
$
96,256

 
100,428,410

 
$
3,732,916

 
$
3,829,172

 
$
133,299

 
$
3,962,471











See accompanying notes to consolidated financial statements.

7

KILROY REALTY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( Unaudited; in thousands)

 
Six Months Ended June 30,
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
72,587

 
$
212,005

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of real estate assets and leasing costs
120,734

 
102,127

Depreciation of non-real estate furniture, fixtures and equipment
2,436

 
1,659

Increase in provision for bad debts (Note 3)
1,707

 
—

Non-cash amortization of share-based compensation awards
8,966

 
10,034

Non-cash amortization of deferred financing costs and debt discounts and premiums
1,469

 
1,306

Non-cash amortization of net below market rents
(3,603
)
 
(3,243
)
Gains on sales of depreciable operating properties (Note 2)
(2,257
)
 
(145,990
)
Loss on sale of land
—

 
295

Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
(8,243
)
 
(6,100
)
Straight-line rents
(15,537
)
 
(18,537
)
Net change in other operating assets
(7,418
)
 
(6,071
)
Net change in other operating liabilities
7,575

 
(9,856
)
Net cash provided by operating activities
178,416

 
137,629

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Expenditures for development properties and undeveloped land
(161,045
)
 
(162,122
)
Expenditures for operating properties and other capital assets
(40,738
)
 
(65,543
)
Expenditures for acquisition of operating properties
—

 
(55,415
)
Expenditures for acquisition of undeveloped land
—

 
(33,513
)
Net proceeds received from dispositions (Note 2)
11,865

 
276,622

(Increase) decrease in acquisition-related deposits
(26,100
)
 
1,902

Increase in note receivable
—

 
(1,000
)
Net cash used in investing activities
(216,018
)
 
(39,069
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net proceeds from issuance of common units (Note 8)
308,832

 
—

Redemption of Series G preferred units (Note 8)
(100,000
)
 
—

Proceeds from the issuance of unsecured debt (Note 5)
250,000

 
—

Borrowings on unsecured revolving credit facility
—

 
270,000

Repayments on unsecured revolving credit facility
—

 
(50,000
)
Principal payments on secured debt
(4,213
)
 
(4,808
)
Financing costs
(2,191
)
 
(679
)
Repurchase of common stock and restricted stock units
(11,642
)
 
(5,883
)
Proceeds from exercise of stock options
12,051

 
937

Contributions from noncontrolling interests in consolidated property partnerships
250

 
—

Distributions to noncontrolling interests in consolidated property partnerships
(8,651
)
 
(281
)
Distributions paid to common unitholders
(255,292
)
 
(65,935
)
Distributions paid to preferred unitholders
(5,806
)
 
(6,625
)
Net cash provided by financing activities
183,338

 
136,726

Net increase in cash and cash equivalents and restricted cash
145,736

 
235,286

Cash and cash equivalents and restricted cash, beginning of period
250,129

 
57,204

Cash and cash equivalents and restricted cash, end of period
$
395,865

 
$
292,490

 



See accompanying notes to consolidated financial statements.

8

KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Basis of Presentation

Organization

Kilroy Realty Corporation (the “Company”) is a self-administered real estate investment trust (“REIT”) active in premier office and mixed-use submarkets along the West Coast. We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in the coastal regions of Los Angeles, Orange County, San Diego County, the San Francisco Bay Area and Greater Seattle, which we believe have strategic advantages and strong barriers to entry. Class A real estate encompasses attractive and efficient buildings of high quality that are attractive to tenants, are well-designed and constructed with above-average material, workmanship and finishes and are well-maintained and managed. We qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “KRC.”

We own our interests in all of our real estate assets through Kilroy Realty, L.P. (the “Operating Partnership”) and Kilroy Realty Finance Partnership, L.P. (the “Finance Partnership”). We generally conduct substantially all of our operations through the Operating Partnership. Unless stated otherwise or the context indicates otherwise, the terms “Kilroy Realty Corporation” or the “Company,” “we,” “our,” and “us” refer to Kilroy Realty Corporation and its consolidated subsidiaries and the term “Operating Partnership” refers to Kilroy Realty, L.P. and its consolidated subsidiaries. The descriptions of our business, employees and properties apply to both the Company and the Operating Partnership.

Our stabilized portfolio of operating properties was comprised of the following properties at June 30, 2017 :

 
Number of
Buildings
 
Rentable
Square Feet
(unaudited)
 
Number of
Tenants
 
Percentage 
Occupied (unaudited)
 
Percentage Leased (unaudited)
Stabilized Office Properties
111

 
14,394,534

 
543

 
93.9
%
 
96.0
%

 
Number of
Buildings
 
Number of Units
 
Percentage 
Occupied
(unaudited)
 
Percentage Leased
(unaudited)
Stabilized Residential Property
1

 
200

 
77.0
%
 
82.0
%

Our stabilized portfolio includes all of our properties with the exception of development and redevelopment properties currently under construction or committed for construction, “lease-up” properties, real estate assets held for sale and undeveloped land. We define redevelopment properties as those properties for which we expect to spend significant development and construction costs on the existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property. We define “lease-up” properties as office properties we recently developed or redeveloped that have not yet reached 95%  occupancy and are within one year following cessation of major construction activities. There were no operating properties in “lease-up” or held for sale as of June 30, 2017 .

During the six months ended June 30, 2017 , we added one development project to our stabilized office portfolio consisting of 365,359 rentable square feet in Hollywood, California. As of June 30, 2017 , the following properties were excluded from our stabilized portfolio. We did not have any redevelopment properties at June 30, 2017 .

 
Number of
Properties/Projects
 
Estimated Rentable
Square Feet (1)
Development projects under construction (2)
4
 
1,800,000

________________________
(1)
Estimated rentable square feet upon completion.
(2)
Development projects under construction also include 96,000 square feet of retail space and 237 residential units in addition to the estimated office rentable square feet noted above.

Our stabilized portfolio also excludes our near-term and future development pipeline, which as of June 30, 2017 was comprised of six development sites, representing approximately 52 gross acres of undeveloped land.


9
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




As of June 30, 2017 , all of our properties and development projects were owned and all of our business was conducted in the state of California with the exception of twelve  office properties and one development project under construction located in the state of Washington. All of our properties and development projects are 100% owned, excluding four office properties owned by three consolidated property partnerships.

Two of the three property partnerships, 100 First Street Member, LLC (“100 First LLC”) and 303 Second Street Member, LLC (“303 Second LLC”), each owned one office property in San Francisco, California through subsidiary REITs. As of June 30, 2017 , the Company owned a 56% common equity interest in both 100 First LLC and 303 Second LLC. The third property partnership, Redwood City Partners, LLC (“Redwood LLC”) owned two office properties in Redwood City, California. As of June 30, 2017 , the Company owned an approximate 93% common equity interest in Redwood LLC. The remaining interests in all three property partnerships were owned by unrelated third parties.

Ownership and Basis of Presentation

The consolidated financial statements of the Company include the consolidated financial position and results of operations of the Company, the Operating Partnership, the Finance Partnership, Kilroy Services, LLC (“KSLLC”), 100 First LLC, 303 Second LLC, Redwood LLC and all of our wholly-owned and controlled subsidiaries. The consolidated financial statements of the Operating Partnership include the consolidated financial position and results of operations of the Operating Partnership, the Finance Partnership, KSLLC, 100 First LLC, 303 Second LLC, Redwood LLC and all wholly-owned and controlled subsidiaries of the Operating Partnership. All intercompany balances and transactions have been eliminated in the consolidated financial statements.

As of June 30, 2017 , the Company owned an approximate 97.9% common general partnership interest in the Operating Partnership. The remaining approximate 2.1% common limited partnership interest in the Operating Partnership as of June 30, 2017 was owned by non-affiliated investors and certain of our executive officers and directors (see Note 6). Both the general and limited common partnership interests in the Operating Partnership are denominated in common units. Generally, the number of common units held by the Company is equivalent to the number of outstanding shares of the Company’s common stock, and the rights of all the common units to quarterly distributions and payments in liquidation mirror those of the Company’s common stockholders. The common limited partners have certain redemption rights as provided in the Operating Partnership’s Seventh Amended and Restated Agreement of Limited Partnership, as amended, the “Partnership Agreement”.

Kilroy Realty Finance, Inc., which is a wholly-owned subsidiary of the Company, is the sole general partner of the Finance Partnership and owns a 1.0% common general partnership interest in the Finance Partnership. The Operating Partnership owns the remaining 99.0% common limited partnership interest. We conduct substantially all of our development activities through KSLLC, which is a wholly owned subsidiary of the Operating Partnership. With the exception of the Operating Partnership and our consolidated property partnerships, all of our subsidiaries are wholly-owned.

The accompanying interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31,  2017 . The interim financial statements for the Company and the Operating Partnership should be read in conjunction with the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2016 .

Variable Interest Entities
The Operating Partnership is a variable interest entity (“VIE”) of the Company as the Operating Partnership is a limited partnership in which the common limited partners do not have substantive kick-out or participating rights. At June 30, 2017 , the consolidated financial statements of the Company included two VIEs in addition to the Operating Partnership: 100 First LLC and 303 Second LLC. At June 30, 2017 , the Company and the Operating Partnership were determined to be the primary beneficiary of these two VIEs since we had the ability to control the activities that most significantly impact each of the VIE’s economic performance. As of June 30, 2017 , these two VIEs’ total assets, liabilities and noncontrolling interests included on our consolidated balance sheet were approximately $431.3 million (of which $386.7 million related to real estate held for investment), approximately $152.6 million and approximately $122.4 million , respectively. Revenues, income and net assets generated by 100 First LLC and

10
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




303 Second LLC may only be used to settle its contractual obligations, which primarily consist of operating expenses, capital expenditures and required distributions.

At December 31, 2016 , the consolidated financial statements of the Company and the Operating Partnership included three VIEs in which we were deemed to be the primary beneficiary: 100 First LLC, 303 Second LLC and an entity established during the fourth quarter of 2016 to facilitate a transaction intended to qualify as a like-kind exchange pursuant to Section 1031 of the Code (“Section 1031 Exchange”). In January 2017, the Section 1031 Exchange was successfully completed and the entity established for the 1031 Exchange was no longer a VIE. At December 31, 2016 , the impact of consolidating the VIEs increased the Company’s total assets, liabilities and noncontrolling interests on our consolidated balance sheet by approximately $654.3 million (of which $588.6 million related to real estate held for investment), approximately $166.1 million and approximately $124.3 million , respectively.
Adoption of New Accounting Pronouncements     
Effective January 1, 2017, the Company adopted FASB ASU No. 2017-01 (“ASU 2017-01”) which clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework provides a screen for determining whether an integrated set of assets is a business combination or an asset acquisition and clarifies that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar assets, the set of assets and activities is deemed not to meet the definition of a business. As a result of our adoption of the guidance, which we adopted on a prospective basis, the Company expects that most of our future acquisitions of operating properties and development properties that were previously accounted for as business combinations will instead be accounted for as asset acquisitions under the new guidance. In addition, we expect that most of the transaction costs associated with these future acquisitions will be capitalized as part of the purchase price of the acquisition instead of being expensed as incurred to acquisition-related expenses. The Company did not have any acquisitions of operating properties during the six months ended June 30, 2017 .
Also effective January 1, 2017, the Company adopted ASU No. 2016-18 (“ASU 2016-18”) which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted ASU 2016-18 on a retrospective basis. Therefore, amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Company’s consolidated statements of cash flows for the six months ended June 30, 2017 and 2016 . As a result of the adoption of ASU 2016-18, the change in restricted cash is no longer presented as a separate line item within cash flows from investing activities on the Company’s consolidated statements of cash flows since such balances are now included in total cash at both the beginning and end of the reporting period. As a result, for the six months ended June 30, 2016 , the Company had net cash used in investing activities of $39.1 million instead of net cash used in investing activities of $304.5 million as previously reported since the Company had $258.1 million of restricted cash at June 30, 2016 that was held at qualified intermediaries to facilitate potential future Section1031 Exchanges.
In addition, effective January 1, 2017, the Company adopted ASU No. 2016-09 (“ASU 2016-09”) which simplified several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements.
Recently Issued Accounting Pronouncements

ASU No. 2016-02 “Leases (Topic 842)”

On February 25, 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”) to amend the accounting guidance for leases. The accounting applied by a lessor is largely unchanged under ASU 2016-02. However, the standard requires lessees to recognize lease assets and lease liabilities for leases classified as operating leases on the balance sheet. Lessees will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it will recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted.
We are currently conducting our evaluation of the impact of the guidance on our consolidated financial statements and have an active project team working on the evaluation and implementation of the guidance. We currently believe that the adoption of the standard will not significantly change the accounting for operating leases on our consolidated balance sheets where we are the lessor, and that such leases will be accounted for in a similar method to existing standards with the underlying leased asset being

11
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




reported and recognized as a real estate asset. We currently expect that certain non-lease components will need to be accounted for separately from the lease components, with the lease components continuing to be recognized on a straight-line basis over the term of the lease and certain non-lease components (such as common area maintenance and provision of utilities) being accounted for under the new revenue recognition guidance in ASU 2014-09 discussed below, even when revenue for such non-lease components is not separately stipulated in the lease. In addition, under ASU 2016-02, lessors will only be permitted to capitalize and amortize incremental direct leasing costs. As a result, we expect that upon the adoption of the standard, we will no longer be able to capitalize and amortize certain leasing related costs and instead will expense these costs as incurred. We currently expect this could have a material impact to the Company’s results of operations upon adoption of the standard.
For leases where we are the lessee, specifically for our ground leases, we currently believe that the adoption of the standard will significantly change the accounting on our consolidated balance sheets since both existing ground leases and any future ground leases will be required to be recorded on the Company’s consolidated balance sheets as an obligation of the Company. We currently believe that existing ground leases executed before the January 1, 2019 adoption date will continue to be accounted for as operating leases and will not have a material impact on our recognition of ground lease expense or our results of operations. However, we believe that we will be required to recognize a right of use asset and a lease liability on our consolidated balance sheets equal to the present value of the minimum lease payments required in accordance with each ground lease. As of June 30, 2017 , our future undiscounted minimum rental payments under these leases totaled $253.9 million , with several of the leases containing provisions for rental payments to fluctuate based on fair market value and operating income measurements with expirations through 2093. In addition, we currently believe that for new ground leases entered into after the adoption date of the new standard, such leases could be required to be accounted for as a financing type lease, resulting in ground lease expense recorded using the effective interest method instead of on a straight-line basis over the term of the lease. This could have a significant impact on our results of operations if we enter into material new ground leases after the date of adoption since ground lease expense calculated using the effective interest method results in an increased amount of ground lease expense in the earlier years of a ground lease as compared to the current straight-line method.
We will adopt the guidance on a modified retrospective basis as required by ASU 2016-02. We are in the process of evaluating whether we will elect to apply the practical expedients identified in the standard but currently believe that we may do so.
ASU No. 2014-09 “ Revenue From Contracts with Customers (Topic 606)”

In May 2014, the FASB issued ASU 2014-09 “Revenue From Contracts with Customers (Topic 606)” (“ASU 2014-09”). The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue from contracts with customers and will supersede most of the existing revenue recognition guidance. On May 9, 2016 and December 21, 2016, the FASB issued ASU No. 2016-12 and ASU No. 2016-20, which provides practical expedients, technical corrections, and improvements for certain aspects of ASU No. 2014-09. Public business entities may elect to adopt the amendments as of the original effective date; however, adoption is required for annual reporting periods beginning after December 15, 2017.
We are currently conducting our evaluation of the impact of the guidance on our consolidated financial statements and we have an active project team working on evaluation and implementation of the guidance. We have been compiling an inventory of the sources of revenue that the Company expects will be impacted by ASU 2014-09. Specifically, we have evaluated the impact on the timing of gain recognition for dispositions but currently do not believe there will be a material impact to our consolidated financial statements for dispositions given the simplicity of the Company’s historical disposition transactions. In addition, we currently believe that certain non-lease components of revenue from leases (upon the adoption of ASU 2016-02 on January 1, 2019) and parking revenue may be impacted by the adoption of ASU 2014-09. We are in the process of evaluating the impact of the standard but currently believe the impact would be limited to the timing and income statement presentation of revenue and not the total amount of revenue recognized over time.
Other Recently Issued Pronouncements
On May 10, 2017, the FASB issued ASU No. 2017-09 “Compensation - Stock Compensation (Topic 718)” to clarify the scope of modification accounting. Under the guidance, an entity will not apply modification accounting to a share-based payment award if the award’s fair value, vesting conditions, and classification as an equity or liability instrument remain the same immediately before and after the change. The guidance is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company does not currently anticipate that the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements.

On February 22, 2017, the FASB issued ASU No. 2017-05 “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)” (“ASU 2017-05”) to provide guidance and clarify the scope of the original guidance within Subtopic 610-20 “Gains and Losses from the Derecognition of Nonfinancial Assets” that was issued in connection with ASU

12
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




2014-09, which provided guidance for recognizing gains and losses from the transfer of nonfinancial assets in transactions with noncustomers. ASU 2017-05 additionally adds guidance pertaining to the partial sales of real estate and clarifies that nonfinancial assets within the scope of Accounting Standards Codification Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017, with early application permitted for fiscal years beginning after December 15, 2016. We are currently evaluating the impact of ASU 2017-05 on our consolidated financial statements and currently do not anticipate that the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements.

On August 26, 2016, the FASB issued ASU No. 2016-15 (“ASU 2016-15”) to provide guidance for areas where there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not currently anticipate that the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements.
On June 16, 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”) to amend the accounting for credit losses for certain financial instruments. Under the new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses.  ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not currently anticipate that the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements.
On January 5, 2016, the FASB issued ASU No. 2016-01 (“ASU 2016-01”) to amend the accounting guidance on the classification and measurement of financial instruments. The standard requires that all investments in equity securities, including other ownership interests, are carried at fair value through net income. This requirement does not apply to investments that qualify for equity method accounting or to those that result in consolidation of the investee or for which the entity has elected the predictability exception to fair value measurement. Additionally, the standard requires that the portion of the total fair value change caused by a change in instrument-specific credit risk for financial liabilities for which the fair value option has been elected would be recognized in other comprehensive income. Any accumulated amount remaining in other comprehensive income is reclassified to earnings when the liability is extinguished. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017. The Company does not currently anticipate that the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements.

2.    Dispositions

Operating Property Disposition

The following table summarizes the operating property sold during the six months ended June 30, 2017 .
Location
 
Property Type
 
Month of Disposition
 
Number of Buildings
 
Rentable Square Feet
 
Sales Price (1)
(in millions)
5717 Pacific Center Boulevard, San Diego, CA (2)
 
Office
 
January
 
1
 
67,995

 
$
12.1

Total Dispositions
 
 
 
 
 
1
 
67,995

 
$
12.1

 
 
 
 
 
 
 
 
 
 
 
________________________ 
(1)
Represents gross sales price before the impact of broker commissions and closing costs.
(2)
This property was classified as held for sale at December 31, 2016 .

The gain on the operating property sold during the six months ended June 30, 2017 was $2.3 million .

13
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




3.    Receivables

Current Receivables, net

Current receivables, net is primarily comprised of contractual rents and other lease-related obligations due from tenants. The balance consisted of the following as of June 30, 2017 and December 31, 2016 :

 
June 30, 2017
 
December 31, 2016
 
(in thousands)
Current receivables
$
15,161

 
$
15,172

Allowance for uncollectible tenant receivables
(1,458
)
 
(1,712
)
Current receivables, net
$
13,703

 
$
13,460


Deferred Rent Receivables, net

Deferred rent receivables, net consisted of the following as of June 30, 2017 and December 31, 2016 :

 
June 30, 2017
 
December 31, 2016
 
(in thousands)
Deferred rent receivables
$
236,038

 
$
220,501

Allowance for deferred rent receivables
(2,611
)
 
(1,524
)
Deferred rent receivables, net
$
233,427

 
$
218,977


4.    Prepaid Expenses and Other Assets, Net

Prepaid expenses and other assets, net consisted of the following at June 30, 2017 and December 31, 2016 :
 
June 30, 2017
 
December 31, 2016
 
(in thousands)
Furniture, fixtures and other long-lived assets, net
$
39,693

 
$
40,395

Notes receivable  (1)
19,788

 
19,439

Prepaid expenses & deposits
39,413

 
10,774

Total prepaid expenses and other assets, net
$
98,894

 
$
70,608

_______________
(1)
Approximately $15.1 million of our notes receivable are secured by real estate.

5.    Secured and Unsecured Debt of the Operating Partnership

Unsecured Senior Notes - Private Placement

On February 17, 2017, the Operating Partnership issued the $175.0 million principal amount of its 3.35% Senior Notes, Series A, due February 17, 2027 (the “Series A Notes”), and the $75.0 million principal amount of its 3.45% Senior Notes, Series B, due February 17, 2029 (the “Series B Notes” and, together with the Series A Notes, the “Series A and B Notes”). The Series A and B Notes were issued pursuant to a delayed draw option under a Note Purchase Agreement entered into in connection with a private placement in September 2016. As of June 30, 2017 , there was $175.0 million and $75.0 million issued and outstanding aggregate principal amount of Series A and B Notes, respectively. The Series A Notes mature on February 17, 2027, and the Series B Notes mature on February 17, 2029, unless earlier redeemed or prepaid pursuant to the terms of the Note Purchase Agreement. Interest on the Series A and B Notes is payable semi-annually in arrears on February 17 and August 17 of each year beginning August 17, 2017.

The Operating Partnership may, at its option and upon notice to the purchasers of the Series A and B Notes, prepay at any time all, or from time to time, any part of the Series A and B Notes then outstanding (in an amount not less than 5% of the aggregate principal amount of the Series A and B Notes then outstanding in the case of a partial prepayment), at 100% of the principal amount so prepaid, plus the make-whole amount determined for the prepayment date with respect to such principal amount as set forth in the Note Purchase Agreement.


14
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




In connection with the issuance of the Series A and B Notes, the Company entered into an agreement whereby it guarantees the payment by the Operating Partnership of all amounts due with respect to the Series A and B Notes and the performance by the Operating Partnership of its obligations under the Note Purchase Agreement.

Unsecured Revolving Credit Facility and Term Loan Facility

The following table summarizes the balance and terms of our unsecured revolving credit facility as of June 30, 2017 and December 31, 2016 :

 
June 30, 2017
 
December 31, 2016
 
(in thousands)
Outstanding borrowings
$
—

 
$
—

Remaining borrowing capacity
600,000

 
600,000

Total borrowing capacity (1)
$
600,000

 
$
600,000

Interest rate (2)
2.27
%
 
1.82
%
Facility fee-annual rate (3)
0.200%
Maturity date
July 2019
________________________
(1)
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $311.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.
(2)
The interest rate on our unsecured revolving credit facility is based on an annual rate of LIBOR plus 1.050% .
(3)
Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of June 30, 2017 and December 31, 2016 , $2.6 million and $3.3 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.

The Company intends to borrow under the unsecured revolving credit facility from time to time for general corporate purposes, to finance development and redevelopment expenditures, to fund potential acquisitions and to potentially repay long-term debt. No borrowings under the unsecured revolving credit facility occurred during the six months ended June 30, 2017 .

The following table summarizes the balance and terms of our unsecured term loan facility as of June 30, 2017 and December 31, 2016 :

 
June 30, 2017
 
December 31, 2016
 
(in thousands)
Outstanding borrowings (1)
$
150,000

 
$
150,000

Interest rate (2)
2.36
%
 
1.85
%
Maturity date
July 2019
________________________
(1)
As of June 30, 2017 and December 31, 2016 , $0.5 million and $0.7 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.
(2)
Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus 1.150% .

Additionally, the Company had a $39.0 million unsecured term loan outstanding with an annual interest rate of LIBOR plus 1.150% as of June 30, 2017 and December 31, 2016 , that was to mature in July 2019. As of June 30, 2017 and December 31, 2016 , $0.1 million and $0.2 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan.

In July 2017, the Operating Partnership amended and restated the terms of its unsecured revolving credit facility and unsecured term loan facility (together, the “Facility”). The amendment and restatement increased the size of the unsecured revolving credit facility from $600.0 million to $750.0 million , maintained the size of the unsecured term loan facility of $150.0 million , reduced the borrowing costs and extended the maturity date of the Facility to July 2022. The unsecured term loan facility features two six-month delayed draw options and the Facility was undrawn at closing, including the $150.0 million term loan, which was repaid in full at closing with available cash. Concurrently with the closing of the Facility, the Operating Partnership repaid its $39.0 million unsecured term loan with available cash.


15
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




Debt Covenants and Restrictions

The unsecured revolving credit facility, the unsecured term loan facility, the unsecured term loan, the unsecured senior notes, the Series A and B Notes and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. Some of the more restrictive financial covenants include a maximum ratio of total debt to total asset value, a minimum fixed-charge coverage ratio, a minimum unsecured debt ratio and a minimum unencumbered asset pool debt service coverage ratio. Noncompliance with one or more of the covenants and restrictions could result in the full principal balance of the associated debt becoming immediately due and payable. We believe we were in compliance with all of our debt covenants as of June 30, 2017 .

Debt Maturities

The following table summarizes the stated debt maturities and scheduled amortization payments of our issued and outstanding debt, excluding unamortized debt discounts, premiums and deferred financing costs, as of June 30, 2017 :

Year
(in thousands)  
Remaining 2017
$
3,072

2018
451,669

2019
265,309

2020
255,137

2021
5,342

Thereafter
1,599,023

Total (1)
$
2,579,552

________________________  
(1)
Includes gross principal balance of outstanding debt before the effect of the following at June 30, 2017 : $12.0 million of unamortized deferred financing costs, $6.2 million of unamortized discounts for the unsecured senior notes and $3.5 million of unamortized premiums for the secured debt.

Capitalized Interest and Loan Fees

The following table sets forth gross interest expense, including debt discount/premium and deferred financing cost amortization, net of capitalized interest, for the three and six months ended June 30, 2017 and 2016 . The interest expense capitalized was recorded as a cost of development and increased the carrying value of undeveloped land and construction in progress.

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
(in thousands)
Gross interest expense
$
28,731

 
$
26,668

 
$
56,246

 
$
52,843

Capitalized interest and deferred financing costs
(10,758
)
 
(12,284
)
 
(20,921
)
 
(26,630
)
Interest expense
$
17,973

 
$
14,384

 
$
35,325

 
$
26,213


6.    Noncontrolling Interests on the Company’s Consolidated Financial Statements

Common Units of the Operating Partnership

The Company owned an approximate 97.9% , 97.5% and 97.2% common general partnership interest in the Operating Partnership as of June 30, 2017 , December 31, 2016 and June, 30, 2016 , respectively. The remaining approximate 2.1% , 2.5% and 2.8% common limited partnership interest as of June 30, 2017 , December 31, 2016 and June, 30, 2016 , respectively, was owned by non-affiliated investors and certain of our executive officers and directors in the form of noncontrolling common units. There were 2,077,193 , 2,381,543 and 2,631,276 common units outstanding held by these investors, executive officers and directors as of June 30, 2017 , December 31, 2016 and June, 30, 2016 , respectively.

The noncontrolling common units may be redeemed by unitholders for cash. Except under certain circumstances, we, at our option, may satisfy the cash redemption obligation with shares of the Company’s common stock on a one-for-one basis. If satisfied in cash, the value for each noncontrolling common unit upon redemption is the amount equal to the average of the closing quoted price per share of the Company’s common stock, par value $.01 per share, as reported on the NYSE for the ten trading days immediately preceding the applicable redemption date. The aggregate value upon redemption of the then-outstanding

16
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




noncontrolling common units was $158.6 million and $174.9 million as of June 30, 2017 and December 31, 2016 , respectively. This redemption value does not necessarily represent the amount that would be distributed with respect to each noncontrolling common unit in the event of our termination or liquidation. In the event of our termination or liquidation, it is expected in most cases that each common unit would be entitled to a liquidating distribution equal to the liquidating distribution payable in respect of each share of the Company’s common stock.

7.    Stockholders’ Equity of the Company

Preferred Stock Redemption

On March 30, 2017 (the “Redemption Date”), the Company redeemed all 4,000,000 shares of its 6.875% Series G Cumulative Redeemable Preferred Stock (“Series G Preferred Stock”). The shares of Series G Preferred Stock were redeemed at a redemption price equal to their stated liquidation preference of $25.00 per share, representing $100.0 million in aggregate, plus all accrued and unpaid dividends to the Redemption Date.

During the six months ended June 30, 2017 , we recognized a non-recurring non-cash charge of $3.8 million as a reduction to net income available to common stockholders for the original issuance costs related to the Series G Preferred Stock.

Common Stock Issuance

In January 2017, the Company completed an underwritten public offering of 4,427,500 shares of its common stock. The net offering proceeds, after deducting underwriting discounts and offering expenses, were approximately $308.8 million . We used a portion of the proceeds to partially fund our 2016 special dividend and will use the remaining proceeds for general corporate uses, to fund development expenditures, for potential future acquisitions and to repay outstanding indebtedness.

At-The-Market Stock Offering Program

Under our current at-the-market stock offering program, which commenced in December 2014, we may offer and sell shares of our common stock having an aggregate gross sales price of up to $300.0 million from time to time in “at-the-market” offerings. No shares of common stock were sold under this program during the six months ended June 30, 2017 . Since commencement of the program through June 30, 2017 , we have sold 2,459,165 shares of common stock having an aggregate gross sales price of $182.4 million . As of June 30, 2017 , shares of common stock having an aggregate gross sales price of up to $117.6 million remain available to be sold under this program. Actual future sales will depend upon a variety of factors, including but not limited to market conditions, the trading price of the Company’s common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under this program.

Payment of 2016 Special Cash Dividend

On January 13, 2017 , the Company paid $184.3 million of special cash dividends, which was the equivalent of $1.90 of special cash dividend per share of common stock to stockholders of record on December 30, 2016 . This special dividend payment was in addition to the $36.4 million of regular dividends we also paid on January 13, 2017 to common stockholders, unitholders and RSU holders of record on December 30, 2016 .

8.    Partners’ Capital of the Operating Partnership

Preferred Stock Redemption

On March 30, 2017 , the Company redeemed all 4,000,000 units of its 6.875% Series G Cumulative Redeemable Preferred Stock. For each share of Series G Preferred Stock that was outstanding, the Company had an equivalent number of 6.875% Series G Preferred Units (“Series G Preferred Units”) outstanding with substantially similar terms as the Series G Preferred Stock. In connection with the redemption of the Series G Preferred Stock, the Series G Preferred Units held by the Company were redeemed by the Operating Partnership.

Issuance of Common Units

In January 2017, the Company completed an underwritten public offering of 4,427,500 shares of its common stock as discussed in Note 7. The net offering proceeds of approximately $308.8 million were contributed by the Company to the Operating Partnership in exchange for 4,427,500 common units.

17
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)





Common Units Outstanding

The following table sets forth the number of common units held by the Company and the number of common units held by non-affiliated investors and certain of our executive officers and directors in the form of noncontrolling common units as well as the ownership interest held on each respective date:

 
June 30, 2017
 
December 31, 2016
 
June 30, 2016
Company owned common units in the Operating Partnership
98,351,217

 
93,219,439

 
92,254,768

Company owned general partnership interest
97.9
%
 
97.5
%
 
97.2
%
Noncontrolling common units of the Operating Partnership
2,077,193

 
2,381,543

 
2,631,276

Ownership interest of noncontrolling interest
2.1
%
 
2.5
%
 
2.8
%

For further discussion of the noncontrolling common units as of June 30, 2017 and December 31, 2016 , refer to Note 6.

9.    Share-Based Compensation

Stockholder Approved Equity Compensation Plans

As of June 30, 2017 , we maintained one share-based incentive compensation plan, the Kilroy Realty 2006 Incentive Award Plan, as amended (the “2006 Plan”). As of June 30, 2017 , 2,026,925 shares were available for grant under the 2006 Plan. The calculation of shares available for grant is presented after taking into account a reserve for a sufficient number of shares to cover
the vesting and payment of 2006 Plan awards that were outstanding on that date, including performance-based vesting awards at (i) levels actually achieved for the performance conditions (as defined below) for which the performance period has been completed and (ii) at target levels for the performance or market conditions (as defined below) for awards still in a performance period.

2017 Share-Based Compensation Grants

In February 2017 , the Executive Compensation Committee of the Company’s Board of Directors awarded 229,976 restricted stock units (“RSUs”) to certain officers of the Company under the 2006 Plan, which included 130,956 RSUs (at the target level of performance), or 57% , that are subject to market and/or performance-based vesting requirements (the “2017 Performance-Based RSUs”) and 99,020 RSUs, or 43% , that are subject to time-based vesting requirements (the “2017 Time-Based RSUs”).

2017 Performance-Based RSU Grant

The 2017 Performance-Based RSUs are scheduled to vest at the end of a three -year period based upon the achievement of pre-set FFO per share goals for the year ending December 31, 2017 (the “FFO performance condition”) and also based upon either the average FAD per share growth or the Company’s average debt to EBITDA ratio (the “other performance conditions”) or the average annual relative total stockholder return ranking for the Company compared to an established comparison group of companies (the “market condition”) for the three -year period ending December 31, 2019. The 2017 Performance-Based RSUs are also subject to a three -year service vesting provision and are scheduled to cliff vest at the end of the three -year period. The number of 2017 Performance-Based RSUs ultimately earned could fluctuate from the target number of 2017 Performance-Based RSUs granted based upon the levels of achievement for the FFO performance condition, the other performance conditions and the market condition. The estimate of the number of 2017 Performance-Based RSUs earned is evaluated quarterly during the performance period based on our estimate for each of the performance conditions measured against the applicable goals. As of June 30, 2017 , the number of 2017 Performance-Based RSUs estimated to be earned based on the Company’s estimate of the performance conditions measured against the applicable goals was 130,956 , and the compensation cost recorded to date for this program was based on that estimate. Compensation expense for the 2017 Performance-Based RSU grant will be recorded on a straight-line basis over the three -year period.

Each 2017 Performance-Based RSU represents the right, subject to the applicable vesting conditions, to receive one share of our common stock in the future. The total fair value of the 2017 Performance-Based RSU grant was $10.3 million at February 24, 2017 . The determination of the fair value of the 2017 Performance-Based RSU grant with other performance conditions takes into consideration the likelihood of achievement of the FFO performance condition and the other performance conditions. The grant date fair value for the performance awards with a market condition was calculated using a Monte Carlo simulation pricing

18
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




model based on the assumptions in the table below. For the portion of the 2017 Performance-Based RSUs subject to the market condition, for the six months ended June 30, 2017 , we recorded compensation expense based upon the $80.89 fair value at February 24, 2017 . The following table summarizes the assumptions utilized in the Monte Carlo simulation pricing model:
 
Fair Value Assumptions
Fair value per share at February 24, 2017
$80.89
Expected share price volatility
21.00%
Risk-free interest rate
1.39%
Remaining expected life
2.8 years

The computation of expected volatility is based on a blend of the historical volatility of our shares of common stock over approximately 5.6 years, as that is expected to be most consistent with future volatility and equates to a time period twice as long as the approximate 2.8 -year remaining performance period of the RSUs and implied volatility data based on the observed pricing of six month publicly-traded options on our shares of common stock. The risk-free interest rate is based on the yield curve on zero-coupon U.S. Treasury STRIP securities in effect at February 24, 2017 . The expected life of the RSUs is equal to the remaining 2.8 year vesting period at February 24, 2017 .

2017 Time-Based RSU Grant

The 2017 Time-Based RSUs are scheduled to vest in three equal installments beginning on January 5, 2018 through January 5, 2020. Compensation expense for the 2017 Time-Based RSUs will be recognized on a straight-line basis over the three -year service vesting period. Each 2017 Time-Based RSU represents the right to receive one share of our common stock in the future. The total fair value of the 2017 Time-Based RSU grant was $7.5 million , which was based on the $73.30 and $77.16 closing share prices of the Company’s common stock on the NYSE on the February 3, 2017 and February 24, 2017 grant dates, respectively.

Share-Based Award Activity

During the six months ended  June 30, 2017 ,  272,000  non-qualified stock options were exercised and issued at an exercise price per share equal to  $42.61 . As of June 30, 2017 , there were 39,500 stock options outstanding.

Share-Based Compensation Cost Recorded During the Period

The total compensation cost for all share-based compensation programs was $6.5 million and $6.6 million for the three  months ended June 30, 2017 and 2016 , respectively, and $12.6 million and $12.5 million for the six months ended June 30, 2017 and 2016 , respectively. Of the total share-based compensation costs, $1.6 million and $1.3 million was capitalized as part of real estate assets and deferred leasing costs for the three  months ended June 30, 2017 and 2016 , respectively, and $3.7 million and $2.5 million for the six months ended June 30, 2017 and 2016 , respectively. As of June 30, 2017 , there was approximately $35.1 million of total unrecognized compensation cost related to nonvested incentive awards granted under share-based compensation arrangements that is expected to be recognized over a weighted-average period of 1.9  years. The remaining compensation cost related to these nonvested incentive awards had been recognized in periods prior to June 30, 2017 .

10.    Commitments and Contingencies

General

As of June 30, 2017 , we had commitments of approximately $736.8 million , excluding our ground lease commitments, for contracts and executed leases directly related to our operating properties and development projects.

Environmental Matters

We follow the policy of monitoring all of our properties, both acquisition and existing stabilized portfolio properties, for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liability with respect to our stabilized portfolio properties that would have a material adverse effect on our financial condition, results of operations and cash flow, or that we believe would require additional disclosure or the recording of a loss contingency.


19
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




As of June 30, 2017 , we had accrued environmental remediation liabilities of approximately $21.3 million recorded on our consolidated balance sheets in connection with certain development projects and recent development acquisitions. It is possible that we could incur additional environmental remediation costs in connection with these recent development acquisitions.  However, given we are in the early stages of development on certain of these projects, potential additional environmental costs are not reasonably estimable at this time.

11.    Fair Value Measurements and Disclosures

Assets and Liabilities Reported at Fair Value

The only assets we record at fair value on our consolidated financial statements are the marketable securities related to our Deferred Compensation Plan. The following table sets forth the fair value of our marketable securities as of June 30, 2017 and December 31, 2016 :

 
Fair Value (Level 1) (1)
 
June 30, 2017
 
December 31, 2016
Description
(in thousands)
Marketable securities (2)
$
16,010

 
$
14,773

________________________
(1)
Based on quoted prices in active markets for identical securities.
(2)
The marketable securities are held in a limited rabbi trust.

We report the change in the fair value of the marketable securities at the end of each accounting period in interest income and other net investment gains in the consolidated statements of operations. We also adjust the related Deferred Compensation Plan liability to fair value at the end of each accounting period based on the performance of the benchmark funds selected by each participant, which results in a corresponding increase or decrease to compensation cost for the period.

The following table sets forth the net gain on marketable securities recorded during the three and six months ended June 30, 2017 and 2016 :

 
Three Months Ended June 30,
 
Six Months Ended June 30,

2017
 
2016
 
2017
 
2016
Description
(in thousands)
 
(in thousands)
Net gain on marketable securities
$
512

 
$
249

 
$
1,183

 
$
386

    
Financial Instruments Disclosed at Fair Value

The following table sets forth the carrying value and the fair value of our other financial instruments as of June 30, 2017 and December 31, 2016 :

 
June 30, 2017
 
December 31, 2016
 
Carrying
Value
 
Fair
Value (1)
 
Carrying
Value
 
Fair
Value  (1)
 
(in thousands)
Liabilities
 
 
 
 
 
 
 
Secured debt, net
$
467,758

 
$
467,782

 
$
472,772

 
$
469,234

Unsecured debt, net
2,097,083

 
2,172,095

 
1,847,351

 
1,900,487

________________________
(1)
Fair value calculated using Level II inputs, which are based on model-derived valuations in which significant inputs and significant value drivers are observable in active markets.



20
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)





12.    Net Income Available to Common Stockholders Per Share of the Company

The following table reconciles the numerator and denominator in computing the Company’s basic and diluted per-share computations for net income available to common stockholders for the three and six  months ended June 30, 2017 and 2016 :

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
(in thousands, except share and per share amounts)
Numerator:
 
 
 
 
 
 
 
Net income attributable to Kilroy Realty Corporation
$
31,448

 
$
32,847

 
$
64,973

 
$
207,155

Total preferred dividends
(1,615
)
 
(3,312
)
 
(8,811
)
 
(6,625
)
Allocation to participating securities (1)
(511
)
 
(423
)
 
(959
)
 
(818
)
Numerator for basic and diluted net income available to common stockholders
$
29,322

 
$
29,112

 
$
55,203

 
$
199,712

Denominator:
 
 
 
 
 
 
 
Basic weighted average vested shares outstanding
98,275,471

 
92,209,955

 
97,834,255

 
92,217,238

Effect of dilutive securities
551,907

 
614,831

 
593,090

 
566,827

Diluted weighted average vested shares and common share equivalents outstanding
98,827,378

 
92,824,786

 
98,427,345

 
92,784,065

Basic earnings per share:
 
 
 
 
 
 
 
Net income available to common stockholders per share
$
0.30

 
$
0.32

 
$
0.56

 
$
2.17

Diluted earnings per share:
 
 
 
 
 
 
 
Net income available to common stockholders per share
$
0.30

 
$
0.31

 
$
0.56

 
$
2.15

________________________  
(1)
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.

Share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities. The impact of potentially dilutive common shares, including stock options, RSUs and other securities are considered in our diluted earnings per share calculation for the three and six months ended June 30, 2017 and 2016 . Certain market measure-based RSUs are not included in dilutive securities for the three and six months ended June 30, 2017 and 2016 , as not all performance metrics had been met by the end of the applicable reporting periods.

See Note 9 “Share-Based Compensation” for additional information regarding share-based compensation.


21
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)





13.    Net Income Available to Common Unitholders Per Unit of the Operating Partnership

The following table reconciles the numerator and denominator in computing the Operating Partnership’s basic and diluted per-unit computations for net income available to common unitholders for the three and six months ended June 30, 2017 and 2016 :

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
(in thousands, except unit and per unit amounts)
Numerator:
 
 
 
 
 
 
 
Net income attributable to Kilroy Realty, L.P.

$
31,971

 
$
33,590

 
$
66,025

 
$
211,423

Total preferred distributions
(1,615
)
 
(3,312
)
 
(8,811
)
 
(6,625
)
Allocation to participating securities (1)
(511
)
 
(423
)
 
(959
)
 
(818
)
Numerator for basic and diluted net income available to common unitholders
$
29,845

 
$
29,855

 
$
56,255

 
$
203,980

Denominator:
 
 
 
 
 
 
 
Basic weighted average vested units outstanding
100,352,664

 
94,841,231

 
100,024,000

 
94,514,876

Effect of dilutive securities
551,907

 
614,831

 
593,090

 
566,827

Diluted weighted average vested units and common unit equivalents outstanding
100,904,571

 
95,456,062

 
100,617,090

 
95,081,703

Basic earnings per unit:
 
 
 
 
 
 
 
Net income available to common unitholders per unit
$
0.30

 
$
0.31

 
$
0.56

 
$
2.16

Diluted earnings per unit:
 
 
 
 
 
 
 
Net income available to common unitholders per unit
$
0.30

 
$
0.31

 
$
0.56

 
$
2.15

________________________  
(1)
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.

Share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities. The impact of potentially dilutive common units, including stock options, RSUs and other securities are considered in our diluted earnings per share calculation for the three and six months ended June 30, 2017 and 2016 . Certain market measure-based RSUs are not included in dilutive securities for the three and six months ended June 30, 2017 and 2016 , as not all performance metrics had been met by the end of the applicable reporting periods.

See Note 9 “Share-Based Compensation” for additional information regarding share-based compensation.


22
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)





14.    Supplemental Cash Flow Information of the Company

Supplemental cash flow information is included as follows (in thousands):

 
Six Months Ended June 30,
 
2017
 
2016
SUPPLEMENTAL CASH FLOWS INFORMATION:
 
 
 
Cash paid for interest, net of capitalized interest of $20,219 and $25,674 as of June 30, 2017 and 2016, respectively
$
30,977

 
$
25,787

NON-CASH INVESTING TRANSACTIONS:
 
 
 
Accrual for expenditures for operating properties and development properties
$
66,967

 
$
50,246

Tenant improvements funded directly by tenants
$
9,221

 
$
10,713

Assumption of accrued liabilities in connection with acquisitions
$
—

 
$
4,911

NON-CASH FINANCING TRANSACTIONS:
 
 
 
Accrual of dividends and distributions payable to common stockholders and common unitholders
$
43,305

 
$
36,093

Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders
$
797

 
$
1,656

Exchange of common units of the Operating Partnership into shares of the Company’s common stock
$
10,939

 
$
39

Issuance of common units of the Operating Partnership in connection with an acquisition
$
—

 
$
48,033

Secured debt assumed by buyers in connection with land dispositions
$
—

 
$
2,322



The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2017 and 2016 .

 
Six Months Ended June 30,
 
2017
 
2016
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
 
 
 
Cash and cash equivalents at beginning of period
$
193,418

 
$
56,508

Restricted cash at beginning of period
56,711

 
696

Cash and cash equivalents and restricted cash at beginning of period
$
250,129

 
$
57,204

 
 
 
 
Cash and cash equivalents at end of period
$
387,616

 
$
26,332

Restricted cash at end of period
8,249

 
266,158

Cash and cash equivalents and restricted cash at end of period
$
395,865

 
$
292,490


15.    Supplemental Cash Flow Information of the Operating Partnership:

Supplemental cash flow information is included as follows (in thousands):

 
Six Months Ended June 30,
 
2017
 
2016
SUPPLEMENTAL CASH FLOWS INFORMATION:
 
 
 
Cash paid for interest, net of capitalized interest of $20,219 and $25,674 as of June 30, 2017 and 2016, respectively
$
30,977

 
$
25,787

NON-CASH INVESTING TRANSACTIONS:
 
 
 
Accrual for expenditures for operating properties and development properties
$
66,967

 
$
50,246

Tenant improvements funded directly by tenants
$
9,221

 
$
10,713

Assumption of accrued liabilities in connection with acquisitions
$
—

 
$
4,911

NON-CASH FINANCING TRANSACTIONS:
 
 
 
Accrual of distributions payable to common unitholders
$
43,305

 
$
36,093

Accrual of distributions payable to preferred unitholders
$
797

 
$
1,656

Issuance of common units of the Operating Partnership in connection with an acquisition
$
—

 
$
48,033

Secured debt assumed by buyers in connection with land dispositions
$
—

 
$
2,322



23
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2017 and 2016 .

 
Six Months Ended June 30,
 
2017
 
2016
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
 
 
 
Cash and cash equivalents at beginning of period
$
193,418

 
$
56,508

Restricted cash at beginning of period
56,711

 
696
Cash and cash equivalents and restricted cash at beginning of period
$
250,129

 
$
57,204

 
 
 
 
Cash and cash equivalents at end of period
$
387,616

 
$
26,332

Restricted cash at end of period
8,249

 
266,158

Cash and cash equivalents and restricted cash at end of period
$
395,865

 
$
292,490


16.    Subsequent Events

On July 12, 2017 , aggregate dividends, distributions and dividend equivalents of $43.3 million were paid to common stockholders, common unitholders and RSU holders of record on June 30, 2017 .

On July 12, 2017, the Company announced its intent to redeem all 4,000,000 shares of its 6.375% Series H Cumulative Redeemable Preferred Stock (“Series H Preferred Stock”) on August 15, 2017 by payment of $25.00 per share in cash, totaling $100.0 million . Upon redemption of the outstanding Series H Preferred Stock on August 15, 2017 , the Company will incur an associated non-cash charge of $3.7 million as a reduction to net income available to common stockholders for the related original issuance costs.

On July 24 2017, the Operating Partnership amended and restated the terms of its unsecured revolving credit facility and term loan facility (together, the “Facility”). The amendment and restatement increased the size of the revolving credit facility from $600.0 million to $750.0 million , maintained the size of the term loan facility of $150.0 million , reduced the borrowing costs and extended the maturity date of the Facility to July 2022. The term loan facility features two six-month delayed draw options and the Facility was undrawn at closing, including the $150.0 million term loan, which was repaid in full at closing with available cash. Concurrently with the closing of the Facility, the Operating Partnership repaid its $39.0 million unsecured term loan with available cash.




24

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion relates to our consolidated financial statements and should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. The results of operations discussion is combined for the Company and the Operating Partnership because there are no material differences in the results of operations between the two reporting entities.

Forward-Looking Statements

Statements contained in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are not historical facts may be forward-looking statements. Forward-looking statements include, among other things, statements or information concerning our plans, objectives, capital resources, portfolio performance, results of operations, projected future occupancy and rental rates, lease expirations, debt maturities, potential investments, strategies such as capital recycling, development and redevelopment activity, projected construction costs, projected construction commencement and completion dates, projected square footage of office space that could be constructed on undeveloped land that we own, projected rentable square footage of or number of units in properties under construction or in the development pipeline, anticipated proceeds from capital recycling activity or other dispositions and anticipated dates of those activities or dispositions, projected increases in the value of properties, dispositions, future executive incentive compensation, pending, potential or proposed acquisitions, plans to grow our Net Operating Income and FFO, anticipated market conditions and demographics and other forward-looking financial data, as well as the discussion in “—Factors That May Influence Future Results of Operations,” “—Liquidity and Capital Resource of the Company,” and “—Liquidity and Capital Resources of the Operating Partnership.” Forward-looking statements can be identified by the use of words such as “believes,” “expects,” “projects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” and the negative of these words and phrases and similar expressions that do not relate to historical matters. Forward-looking statements are based on our current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California and Washington; risks associated with our investment in real estate assets, which are illiquid and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants' businesses; our ability to release property at or above current market rates; costs to comply with government regulations, including environmental remediations; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or implementations of, applicable laws, regulations or legislation; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers' financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; and our ability to maintain our status as a REIT. The factors included in this report are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect the Company's and the Operating Partnership's business and financial performance, see the discussion below as well as “Item 1A. Risk Factors” and in our “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s and the Operating Partnership’s annual report on Form 10-K for the year ended December 31,  2016 and their respective other filings with the SEC. All forward-looking statements are based on currently available information and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statement that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.


25

Overview and Background

We are a self-administered REIT active in premier office and mixed-use submarkets along the West Coast. We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in the coastal regions of Los Angeles, Orange County, San Diego County, the San Francisco Bay Area and Greater Seattle, which we believe have strategic advantages and strong barriers to entry. We own our interests in all of our properties through the Operating Partnership and the Finance Partnership and generally conduct substantially all of our operations through the Operating Partnership. We owned an approximate 97.9% , 97.5% and 97.2% general partnership interest in the Operating Partnership as of June 30, 2017 , December 31, 2016 and June 30, 2016 , respectively. All of our properties are held in fee except for the thirteen office buildings that are held subject to long-term ground leases for the land.

Factors That May Influence Future Results of Operations

Development Program

We believe that a portion of our long-term future growth will continue to come from the completion of our in-process development projects, stabilization of recently completed development projects and, subject to market conditions, executing on our near-term and future development pipeline, including expanding entitlements. Over the past several years, we increased our focus on development opportunities and expanded our near-term and future development pipeline through targeted acquisitions of development opportunities on the West Coast.

We have a proactive planning process by which we continually evaluate the size, timing, costs and scope of our development program and, as necessary, scale activity to reflect the economic conditions and the real estate fundamentals that exist in our submarkets. We expect to execute on our development program with prudence and will be pursuing opportunities with attractive economic returns in strategic locations with proximity to public transportation or transportation access and retail amenities and in markets with strong fundamentals and visible demand. We plan to develop in phases as appropriate and we generally favor starting projects that are pre-leased.

Stabilized Development Projects

During the six months ended June 30, 2017 , we added the following project to our stabilized portfolio since the project had reached one year from building shell substantial completion:

•
Columbia Square Phase 2 - Office, located in the heart of Hollywood, California, two blocks from the corner of Sunset Boulevard and Vine Street. This project is comprised of three buildings totaling approximately 365,359 rentable square feet with a total estimated investment of approximately $230.0 million . The project was added to the stabilized portfolio during the first quarter of 2017 and was 82% occupied as of June 30, 2017 . The project is currently 100% leased.

Projects Under Construction

As of June 30, 2017 , we had four projects in our in-process development pipeline that were under construction.

•
333 Dexter, South Lake Union, Washington, which we acquired in February 2015 and commenced construction on in June 2017. This project is currently anticipated to encompass approximately 650,000 gross rentable square feet of office space at a total estimated investment of $380.0 million . Construction is currently in progress and the building core and shell are currently estimated to be completed in the second half of 2019.

•
The Exchange on 16th, Mission Bay, San Francisco, California, which we acquired in May 2014 and commenced construction on in June 2015. This project is currently anticipated to encompass approximately 750,000 gross rentable square feet of office and life science space across four buildings at a total estimated investment of $560.0 million . Construction is currently in progress and the building and core shell are currently estimated to be completed in the first half of 2018.

•
100 Hooper, San Francisco, California, which we acquired in July 2015 and commenced construction on in November 2016. This project will encompass approximately 314,000 square feet of office and approximately 86,000 square feet of production, distribution and repair (“PDR”) space configured in two, four-story buildings. The total estimated cost for this project is approximately $270.0 million . Construction is currently in process and the core and shell of the project is currently expected to be completed in the first half of 2018. The office portion of the project is 100% pre-leased to Adobe

26

Systems Inc. In connection with 100 Hooper, the Company is also developing an adjacent 59,000 square foot PDR space located at 150 Hooper with a total estimated investment of approximately $22.0 million.

•
One Paseo - Phase I (Retail and Residential), San Diego, California, which we acquired in November 2007 and commenced construction on in December 2016. Phase I of this mixed-use project includes site work and related infrastructure for the entire project, as well as 237 residential units and approximately 96,000 square feet of retail space. The total estimated investment for this project is approximately $225.0 million . Construction is currently in process and is currently expected to be completed in phases beginning in the third quarter of 2018.

Near-Term and Future Development Pipeline

As of June 30, 2017 , our near-term development pipeline included two additional future projects located in San Diego County and Los Angeles with an aggregate cost basis of approximately $230.0 million at which we believe we could develop approximately 1.2 million rentable square feet at a total estimated investment of approximately $865.0 million , depending on market conditions.

The following table sets forth information about our near-term development pipeline as of the date of this filing.

Near-Term Development Pipeline (1)
 
Location
 
Potential Start Date (2)
 
Approx. Developable Square Feet
 
Total Estimated Investment
($ in millions)
 
Total Costs as of 6/30/2017 (3)
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
Academy Project
 
Hollywood
 
2017
 
545,000
 
$
425

 
$
80.3

One Paseo - Phases II and III  
 
Del Mar
 
TBD
 
640,000
 
440

 
149.7

Total Near-Term Development Pipeline
 
 
 
 
 
1,185,000
 
$
865

 
$
230.0

________________________
(1)
Project timing, costs, developable square feet and scope could change materially from estimated data provided due to one of more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new office supply, regulatory and entitlement processes, and project design.
(2)
Actual commencement is subject to extensive consideration of market conditions and economic factors.
(3)
Represents cash paid and costs incurred as of June 30, 2017 .

As of June 30, 2017 , our longer term future development pipeline included additional undeveloped land holdings located in various submarkets in San Diego County and the San Francisco Bay Area with an aggregate cost basis of approximately $310.8 million , at which we believe we could develop more than 2.5 million developable square feet, depending on successfully obtaining entitlements and market conditions.

Fluctuations in our development activities could cause fluctuations in the average development asset balances qualifying for interest and other carrying cost and internal cost capitalization in future periods. During the three and six months ended June 30, 2017 , we capitalized interest on in-process development projects and development pipeline projects with an average aggregate cost basis of approximately $1.0 billion, as it was determined these projects qualified for interest and other carrying cost capitalization under GAAP. During the three and six months ended June, 30, 2016 , we capitalized interest on in-process development projects and development pipeline projects with an average aggregate cost basis of approximately $1.2 billion, as it was determined these projects qualified for interest and other carrying cost capitalization under GAAP. For the three and six months ended June 30, 2017 , we capitalized $10.8 million and $20.9 million , respectively, of interest to our qualifying development projects. For the three and six months ended June, 30, 2016 , we capitalized $12.3 million and $26.6 million , respectively, of interest to our qualifying development projects. For the three and six months ended June 30, 2017 , we capitalized $5.1 million and $10.8 million , respectively, of internal costs to our qualifying development projects. For the three and six months ended June, 30, 2016 , we capitalized $4.2 million and $8.7 million , respectively, of internal costs to our qualifying development projects.

Capital Recycling Program . We continuously evaluate opportunities for the potential disposition of properties and undeveloped land in our portfolio or the formation of strategic ventures with the intent of recycling the proceeds generated into capital used to fund new operating and development acquisitions, to finance development and redevelopment expenditures, to repay long-term debt and for other general corporate purposes. As part of this strategy, we attempt to enter into Section 1031 Exchanges and other tax deferred transaction structures, when possible, to defer some or all of the taxable gains on the sales, if any, for federal and state income tax purposes.

In connection with our capital recycling strategy, during the six months ended June 30, 2017 , we completed the sale of one operating property to an unaffiliated third party for gross proceeds of $12.1 million .

Acquisitions . As part of our growth strategy, which is highly dependent on market conditions and business cycles, among other factors, we continue to evaluate strategic opportunities and remain a disciplined buyer of development and redevelopment

27

opportunities as well as value-add operating properties.  We continue to focus on growth opportunities in West Coast markets populated by knowledge and creative based tenants in a variety of industries, including technology, media, healthcare, life sciences, entertainment and professional services.  Against the backdrop of market volatility, we expect to manage a strong balance sheet, execute on our development program and selectively evaluate opportunities that either add immediate Net Operating Income to our portfolio or play a strategic role in our future growth.

We cannot provide assurance that we will enter into any agreements to acquire properties, or undeveloped land, or that the potential acquisitions contemplated by any agreements we may enter into in the future will be completed. In addition, acquisitions are subject to various risks and uncertainties and we may be unable to complete an acquisition after making a nonrefundable deposit or incurring acquisition-related costs.

Incentive Compensation . Our Executive Compensation Committee determines compensation, including cash bonuses and equity incentives, for our executive officers. For 2017, the annual cash bonus program was structured to allow the Executive Compensation Committee to evaluate a variety of key quantitative and qualitative metrics at the end of the year and make a determination based on the Company’s and management’s overall performance. Our Executive Compensation Committee also grants equity incentive awards from time to time that include performance-based and/or market-measure based vesting requirements and/or time-based vesting requirements. As a result, accrued incentive compensation and compensation expense for future awards may be affected by our operating and development performance, financial results, stock price, performance against applicable performance-based vesting goals, market conditions, liquidity measures, and other factors. Consequently, we cannot predict the amounts that will be recorded in future periods related to such incentive compensation.

As of June 30, 2017 , there was approximately $35.1 million of total unrecognized compensation cost related to outstanding nonvested shares of restricted common stock and RSUs issued under share-based compensation arrangements. Those costs are expected to be recognized over a weighted-average period of 1.9   years. The $35.1 million of unrecognized compensation cost does not reflect the future compensation cost for any potential share-based awards that may be issued. Share-based compensation expense for potential future awards could be affected by our operating and development performance, financial results, stock price, performance against applicable performance-based vesting goals, market conditions and other factors.

Information on Leases Commenced and Executed

Leasing Activity and Changes in Rental Rates . The amount of net rental income generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space, newly developed or redeveloped properties, newly acquired properties with vacant space, and space available from unscheduled lease terminations. The amount of rental income we generate also depends on our ability to maintain or increase rental rates in our submarkets. Negative trends in one or more of these factors could adversely affect our rental income in future periods. The following tables set forth certain information regarding leasing activity for our stabilized portfolio during the three and six months ended June 30, 2017 .

For Leases Commenced (1)  
 
1st & 2nd Generation (2)
 
2nd Generation (2)
 
Number of Leases (3)
 
Rentable Square Feet (3)
 
TI/LC per
Sq. Ft. (4)
 
Changes in
Rents (5)(6)
 
Changes in
Cash Rents (7)
 
Retention Rates (8)
 
Weighted Average Lease Term (in months)  
 
New
 
Renewal
 
New
 
Renewal
 
Three Months Ended
June 30, 2017
20

 
15

 
170,649

 
241,976

 
$
70.56

 
21.4
%
 
4.0
%
 
57.5
%
 
103

Six Months Ended
June 30, 2017
37

 
36

 
299,465

 
628,956

 
$
44.03

 
26.5
%
 
12.9
%
 
55.3
%
 
71


28

For Leases Executed (1)(9)  
 
1st & 2nd Generation (2)
 
2nd Generation (2)
 
Number of Leases (3)
 
Rentable Square Feet (3)
 
TI/LC per Sq. Ft. (4)
 
Changes in
Rents (5)(6)
 
Changes in
Cash Rents (7)
 
Weighted Average Lease Term
(in months)
 
New
 
Renewal
 
New
 
Renewal
 
 
 
Three Months Ended
June 30, 2017
27

 
15

 
247,541

 
241,976

 
$
63.29

 
31.7
%
 
12.6
%
 
89

Six Months Ended
June 30, 2017
48

 
36

 
504,043

 
628,956

 
$
49.44

 
30.1
%
 
14.2
%
 
70

________________________
(1)
Includes 100% of consolidated property partnerships.
(2)
First generation leasing includes space where we have made capital expenditures that result in additional revenue generated when the space is re-leased. Second generation leasing includes space where we have made capital expenditures to maintain the current market revenue stream.
(3)
Represents leasing activity for leases that commenced or were signed during the period, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.
(4)
Tenant improvements and leasing commissions per square foot exclude tenant-funded tenant improvements.
(5)
Calculated as the change between GAAP rents for new/renewed leases and the expiring GAAP rents for the same space. Excludes leases for which the space was vacant longer than one year or vacant when the property was acquired.
(6)
Excludes commenced and executed leases of approximately 79,044 and 54,013 square feet, respectively, for the three months ended June 30, 2017 , and 123,705 and 84,867 rentable square feet, respectively, for the six months ended June 30, 2017 , for which the space was vacant longer than one year or being leased for the first time. Space vacant for more than one year is excluded from our change in rents calculations to provide a meaningful market comparison.
(7)
Calculated as the change between stated rents for new/renewed leases and the expiring stated rents for the same space. Excludes leases for which the space was vacant longer than one year or vacant when the property was acquired.
(8)
Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.
(9)
For the three months ended June 30, 2017 , 18 leases totaling 208,292 rentable square feet were signed but not commenced as of June 30, 2017 . For the six months ended June 30, 2017 , 29 leases totaling 380,166 rentable square feet were signed but not commenced as of June 30, 2017 .

As of June 30, 2017 , we believe that the weighted average cash rental rates for our total stabilized portfolio are approximately 16% below the current average market rental rates, which includes a projection that the weighted average cash rental rates for our San Diego stabilized portfolio are approximately 8% above current market rental rates. Individual properties within any particular submarket presently may be leased either above, below, or at the current market rates within that submarket, and the average rental rates for individual submarkets may be above, below, or at the average cash rental rate of our portfolio.

Our rental rates and occupancy are impacted by general economic conditions, including the pace of regional economic growth and access to capital. Therefore, we cannot give any assurance that leases will be renewed or that available space will be re-leased at rental rates equal to or above the current market rates. Additionally, decreased demand and other negative trends or unforeseeable events that impair our ability to timely renew or re-lease space could have further negative effects on our future financial condition, results of operations, and cash flows.

Scheduled Lease Expirations . The following table sets forth certain information regarding our lease expirations for our stabilized portfolio for the remainder of 2017 and the next five years.

Lease Expirations (1)  

Year of Lease Expiration
 
Number of
Expiring
Leases
 
Total Square Feet
 
% of Total Leased Sq. Ft.
 
Annualized Base Rent (2)
 
% of Total Annualized Base Rent  (2)
 
Annualized Base Rent per Sq. Ft. (2)
 
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
Remainder of 2017
 
55

 
576,030

 
4.3
%
 
$
21,091

 
3.7
%
 
$
36.61

2018
 
86

 
1,291,146

 
9.7
%
 
54,135

 
9.5
%
 
41.93

2019
 
102

 
1,651,354

 
12.4
%
 
60,013

 
10.6
%
 
36.34

2020
 
111

 
1,892,287

 
14.2
%
 
71,460

 
12.6
%
 
37.76

2021
 
85

 
1,071,886

 
8.1
%
 
45,860

 
8.1
%
 
42.78

2022
 
60

 
639,938

 
4.8
%
 
25,453

 
4.5
%
 
39.77

Total
 
499

 
7,122,641

 
53.5
%
 
$
278,012

 
49.0
%
 
$
39.03

________________________ 
(1)
For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of June 30, 2017 , space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of June 30, 2017 .
(2)
Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Percentages represent percentage of total portfolio annualized contractual base rental revenue. For additional information on tenant improvement and leasing commission costs incurred by the Company for the current reporting period, please see further discussion under the caption “Information on Leases Commenced and Executed.”


29

In addition to the 0.9 million  rentable square feet, or 6.1% , of currently available space in our stabilized portfolio, leases representing approximately 4.3% and 9.7% of the occupied square footage of our stabilized portfolio are scheduled to expire during 2017 and 2018 , respectively. The leases scheduled to expire during the remainder of 2017 and in 2018 represent approximately 1.9 million rentable square feet or 13.2% of our total annualized base rental revenue. Individual properties within any particular submarket presently may be leased either above, below, or at the current quoted market rates within that submarket, and the average rental rates for individual submarkets may be above, below, or at the average cash rental rate of our overall portfolio. Our ability to re-lease available space depends upon both general market conditions and the market conditions in the specific regions in which individual properties are located.

For the 576,030 rentable square feet or 3.7% of our total annualized base rental revenue scheduled to expire during the remainder of 2017 , we believe that the weighted average cash rental rates in the aggregate are approximately 15% below the current average market rental rates. For the approximately 1.3 million rentable square feet or 9.5% of our total annualized base rental revenue scheduled to expire in 2018 we believe that the weighted average cash rental rates in the aggregate, are approximately at current average market rental rates . Of the 1.3 million rentable square feet scheduled to expire in 2018, 319,975 rentable square feet or 2.8% of our total annualized base rental revenue is located in San Francisco submarkets and we currently believe these expiring leases are approximately 30% below market, and 459,451 rentable square feet or 3.7% of our total annualized base rental revenue is located in San Diego submarkets and we currently believe these expiring leases are approximately 30% above market.


30

Stabilized Portfolio Information

As of June 30, 2017 , our stabilized portfolio was comprised of 111  office properties encompassing an aggregate of approximately 14.4 million rentable square feet and 200 residential units. Our stabilized portfolio includes all of our properties with the exception of development and redevelopment properties currently under construction or committed for construction, “lease-up” properties, real estate assets held for sale and undeveloped land. We define redevelopment properties as those properties for which we expect to spend significant development and construction costs on the existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property. We define “lease-up” properties as office properties we recently developed or redeveloped that have not yet reached 95%  occupancy and are within one year following cessation of major construction activities. We did not have any “lease-up”, redevelopment or held for sale properties at June 30, 2017 .
 
As of June 30, 2017 , the following properties were excluded from our stabilized portfolio:
 
Number of
Properties/Projects
 
Estimated Rentable
Square Feet (1)
Development projects under construction (2)
4
 
1,800,000

________________________
(1)
Estimated rentable square feet upon completion.
(2)
Development projects under construction also include 96,000 square feet of retail space and 237 residential units in addition to the estimated office rentable square feet noted above.

Our stabilized portfolio also excludes our near-term and future development pipeline, which as of June 30, 2017 was comprised of six potential development sites, representing approximately 52  gross acres of undeveloped land on which we believe we have the potential to develop over 4.3 million square feet of office space, depending upon economic conditions.

The following table reconciles the changes in the rentable square feet in our stabilized office portfolio of operating properties from June, 30, 2016 to June 30, 2017 :

 
Number of
Buildings
 
Rentable
Square Feet
Total as of June 30, 2016
102

 
13,660,231

Acquisitions
6

 
344,284

Completed development properties placed in-service
4

 
438,391

Dispositions
(1
)
 
(67,995
)
Remeasurement
—

 
19,623

Total as of June 30, 2017 (1)
111

 
14,394,534

________________________
(1)
Includes four properties owned by consolidated property partnerships.

Occupancy Information

The following table sets forth certain information regarding our stabilized portfolio:

Stabilized Portfolio Occupancy

Region
 
Number of
Buildings
 
Rentable Square Feet
 
Occupancy at (1)  
 
6/30/2017
 
3/31/2017
 
12/31/2016
Los Angeles and Ventura Counties
 
36

 
4,181,131

 
91.2
%
 
91.5
%
 
95.0
%
Orange County
 
1

 
271,556

 
94.7
%
 
95.5
%
 
97.8
%
San Diego
 
31

 
2,718,185

 
93.5
%
 
92.8
%
 
93.2
%
San Francisco Bay Area
 
31

 
5,157,524

 
95.1
%
 
95.5
%
 
97.6
%
Greater Seattle
 
12

 
2,066,138

 
97.0
%
 
97.2
%
 
97.2
%
Total Stabilized Portfolio
 
111

 
14,394,534

 
93.9
%
 
94.1
%
 
96.0
%


31

-
Average Occupancy
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Stabilized Portfolio (1)
94.2
%
 
95.0
%
 
94.2
%
 
95.0
%
Same Store Portfolio (2)
94.7
%
 
95.8
%
 
94.8
%
 
95.7
%
________________________
(1)
Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented and exclude occupancy percentages of properties held for sale.
(2)
Occupancy percentages reported are based on office properties owned and stabilized as of January 1, 2016 and still owned and stabilized as of June 30, 2017 . See discussion under “Results of Operations” for additional information.
 
Our stabilized office portfolio was 93.9% occupied as of June 30, 2017 with 576,030 square feet scheduled to expire during the remainder of 2017 .

Significant Tenants

The following table sets forth information about our fifteen largest tenants based upon annualized rental revenues as of June 30, 2017 .

 
Tenant Name
 
Annualized Base Rental Revenue (1)
($ in thousands)
 
Rentable
Square Feet
 
Percentage of Total Annualized Base Rental Revenue
 
Percentage of
Total Rentable
Square Feet
 
 
LinkedIn Corporation
 
$
28,344

 
663,239

 
5.0
%
 
4.6
%
 
salesforce.com, inc. (2)
 
24,183

 
468,445

 
4.3
%
 
3.3
%
 
DIRECTV, LLC
 
22,467

 
667,852

 
4.0
%
 
4.6
%
 
Box, Inc.
 
22,441

 
371,792

 
4.0
%
 
2.6
%
 
Synopsys, Inc.
 
15,492

 
340,913

 
2.7
%
 
2.4
%
 
Dropbox, Inc.
 
14,827

 
182,054

 
2.6
%
 
1.3
%
 
Bridgepoint Education, Inc.
 
14,064

 
296,708

 
2.5
%
 
2.1
%
 
Viacom International, Inc.
 
13,718

 
211,343

 
2.4
%
 
1.5
%
 
Delta Dental of California
 
10,313

 
188,143

 
1.8
%
 
1.3
%
 
AMN Healthcare, Inc.
 
9,001

 
176,075

 
1.6
%
 
1.2
%
 
Concur Technologies
 
8,852

 
243,429

 
1.6
%
 
1.7
%
 
Biotech/Healthcare Industry Tenant
 
8,461

 
128,688

 
1.5
%
 
0.9
%
 
Riot Games, Inc.
 
7,355

 
131,537

 
1.3
%
 
0.9
%
 
Neurocrine Biosciences, Inc.
 
6,883

 
140,591

 
1.2
%
 
1.0
%
 
SCAN Group
 
6,845

 
211,086

 
1.2
%
 
1.5
%
 
Total Top Fifteen Tenants
 
$
213,246

 
4,421,895

 
37.7
%
 
30.9
%
________________________
(1)
Includes 100% of annualized base rental revenues of consolidated property partnerships.
(2)
The Company has entered into leases with various affiliates of the tenant .


32

Results of Operations

Net Operating Income

Management internally evaluates the operating performance and financial results of our stabilized portfolio based on Net Operating Income. We define “Net Operating Income” as consolidated operating revenues (rental income, tenant reimbursements and other property income) less consolidated operating expenses (property expenses, real estate taxes, provision for bad debts and ground leases).

Net Operating Income is considered by management to be an important and appropriate supplemental performance measure to net income because we believe it helps both investors and management to understand the core operations of our properties excluding corporate and financing-related costs and non-cash depreciation and amortization. Net Operating Income is an unlevered operating performance metric of our properties and allows for a useful comparison of the operating performance of individual assets or groups of assets. This measure thereby provides an operating perspective not immediately apparent from GAAP income from operations or net income. In addition, Net Operating Income is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. Other real estate companies may use different methodologies for calculating Net Operating Income, and accordingly, our presentation of Net Operating Income may not be comparable to other real estate companies. Because of the exclusion of the items shown in the reconciliation below, Net Operating Income should only be used as a supplemental measure of our financial performance and not as an alternative to GAAP income from operations or net income.

Management further evaluates Net Operating Income by evaluating the performance from the following property groups:

•
Same Store Properties – includes the consolidated results of all of the office properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1,  2016 and still owned and included in the stabilized portfolio as of June 30, 2017 ;

•
Stabilized Development Properties – includes the results generated by the following:
◦
One office development project that was added to the stabilized portfolio in the first quarter of 2017;
◦
Two office development projects that were completed and stabilized in March 2016;
◦
Our residential project that was completed in June 2016; and
◦
One office development project that was added to the stabilized portfolio in the fourth quarter of 2016;

•
Acquisition Properties – includes the results, from the dates of acquisition through the periods presented, for the four office and three retail buildings we acquired in three transactions during 2016; and

•
Dispositions and Other – includes the results of the one property disposed of during the first quarter of 2017, the six properties disposed of in 2016 and expenses for certain of our in-process, near-term and future development projects.

The following table sets forth certain information regarding the property groups within our stabilized office portfolio as of June 30, 2017 :
Group
 
# of Buildings
 
Rentable
Square Feet
Same Store Properties
 
98

 
12,856,742

Stabilized Development Properties
 
6

 
1,079,333

Acquisition Properties
 
7

 
458,459

Total Stabilized Office Portfolio
 
111

 
14,394,534




33


Comparison of the Three Months Ended June 30, 2017 to the Three Months Ended June 30, 2016

The following table summarizes our Net Operating Income, as defined, for our total portfolio for the three months ended June 30, 2017 and 2016 .

 
Three Months Ended June 30,
 
Dollar
Change
 
Percentage
Change
 
2017
 
2016
 
 
($ in thousands)
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
 
 
 
 
 
 


Net Income Available to Common Stockholders
$
29,833

 
$
29,535

 
$
298

 
1.0
 %
Preferred dividends
1,615

 
3,312

 
(1,697
)
 
(51.2
)%
Net income attributable to Kilroy Realty Corporation
$
31,448

 
$
32,847

 
$
(1,399
)
 
(4.3
)%
Net income attributable to noncontrolling common units of the Operating Partnership
616

 
829

 
(213
)
 
(25.7
)%
Net income attributable to noncontrolling interests in consolidated property partnerships
3,242

 
216

 
3,026

 
1,400.9
 %
Net income
$
35,306

 
$
33,892

 
$
1,414

 
4.2
 %
Unallocated expense (income):
 
 
 
 
 
 
 
General and administrative expenses
14,303

 
13,979

 
324

 
2.3
 %
Acquisition-related expenses
—

 
714

 
(714
)
 
(100.0
)%
Depreciation and amortization
62,251

 
53,346

 
8,905

 
16.7
 %
Interest income and other net investment gains
(1,038
)
 
(311
)
 
(727
)
 
233.8
 %
Interest expense
17,973

 
14,384

 
3,589

 
25.0
 %
Net loss on sale of land
—

 
295

 
(295
)
 
(100.0
)%
Net Operating Income, as defined

$
128,795

 
$
116,299

 
$
12,496

 
10.7
 %


34

The following tables summarize our Net Operating Income, as defined, for our total portfolio for the three months ended June 30, 2017 and 2016 .

 
Three Months Ended June 30,
 
2017
 
2016
 
Same Store
 
Stabilized
Develop-ment
 
Acquisi-tion Properties
 
Disposi-tions & Other
 
Total
 
Same Store
 
Stabilized
Develop-ment
 
Acquisi-tion Properties
 
Disposi-tions & Other
 
Total
 
(in thousands)
Operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
133,844

 
$
17,821

 
$
7,260

 
$
—

 
$
158,925

 
$
132,702

 
$
9,953

 
$
372

 
$
626

 
$
143,653

Tenant reimbursements
15,740

 
1,803

 
1,724

 
—

 
19,267

 
14,646

 
1,272

 
55

 
165

 
16,138

Other property income
1,178

 
37

 
203

 
988

 
2,406

 
324

 
7

 
—

 
11

 
342

Total
150,762

 
19,661

 
9,187

 
988

 
180,598

 
147,672

 
11,232

 
427

 
802

 
160,133

Property and related expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property expenses
27,580

 
4,383

 
1,312

 
29

 
33,304

 
25,956

 
2,461

 
12

 
792

 
29,221

Real estate taxes
13,026

 
1,909

 
1,433

 
175

 
16,543

 
11,912

 
1,544

 
18

 
371

 
13,845

Provision for bad debts
166

 
(116
)
 
359

 
—

 
409

 
—

 
—

 
—

 
—

 
—

Ground leases
948

 
—

 
599

 
—

 
1,547

 
768

 
—

 
—

 
—

 
768

Total
41,720

 
6,176

 
3,703

 
204

 
51,803

 
38,636

 
4,005

 
30

 
1,163

 
43,834

Net Operating Income,
as defined
$
109,042

 
$
13,485

 
$
5,484

 
$
784

 
$
128,795

 
$
109,036

 
$
7,227

 
$
397

 
$
(361
)
 
$
116,299


 
Three Months Ended June 30, 2017 as compared to the Three Months Ended June 30, 2016
 
Same Store
 
Stabilized Development
 
Acquisition Properties
 
Dispositions & Other
 
Total
 
Dollar Change
 
Percent Change
 
Dollar Change
 
Percent Change
 
Dollar Change
 
Percent Change
 
Dollar Change
 
Percent Change
 
Dollar Change
 
Percent Change
 
($ in thousands)
Operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
1,142

 
0.9
%
 
$
7,868

 
79.1
 %
 
$
6,888

 
NM*
 
$
(626
)
 
(100.0
)%
 
$
15,272

 
10.6
%
Tenant reimbursements
1,094

 
7.5

 
531

 
41.7

 
1,669

 
NM*
 
(165
)
 
(100.0
)
 
3,129

 
19.4

Other property income
854

 
263.6

 
30

 
428.6

 
203

 
100.0
 
977

 
NM*

 
2,064

 
603.5

Total
3,090

 
2.1

 
8,429

 
75.0

 
8,760

 
NM*
 
186

 
23.2

 
20,465

 
12.8

Property and related expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property expenses
1,624

 
6.3

 
1,922

 
78.1

 
1,300

 
NM*
 
(763
)
 
(96.3
)
 
4,083

 
14.0

Real estate taxes
1,114

 
9.4

 
365

 
23.6

 
1,415

 
NM*
 
(196
)
 
(52.8
)
 
2,698

 
19.5

Provision for bad debts
166

 
100.0

 
(116
)
 
(100.0
)
 
359

 
100.0
 
—

 
—

 
409

 
100.0

Ground leases
180

 
23.4

 
—

 
—

 
599

 
100.0
 
—

 
—

 
779

 
101.4

Total
3,084

 
8.0

 
2,171

 
54.2

 
3,673

 
NM*
 
(959
)
 
(82.5
)
 
7,969

 
18.2

Net Operating Income,
as defined
$
6

 
—
%
 
$
6,258

 
86.6
 %
 
$
5,087

 
NM*
 
$
1,145

 
(317.2
)%
 
$
12,496

 
10.7
%
________________________  
* Percentage not meaningful.

Net Operating Income increased $12.5 million , or 10.7% , for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016 resulting from:

•
Generally consistent Net Operating Income attributable to the Same Store Properties for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016 driven by the following activity:

•
An increase in rental income of $1.1 million primarily due to:

◦
$3.0 million increase from new leases and renewals at higher rates across all regions; partially offset by

◦
$1.9 million decrease due to lease expirations and early terminations in the San Francisco Bay area;


35


•
An increase in tenant reimbursements of $1.1 million primarily due to higher reimbursable expenses;

•
An increase in other property income of $0.9 million primarily due to early lease termination fees in the San Francisco Bay area;

•
An offsetting increase in property and related expenses of $3.1 million primarily due to the following:

◦
$1.1 million increase in real estate taxes primarily due to $0.8 million of lower supplemental taxes at four properties in 2016 and $0.3 million from regular annual property tax increases in 2017;

◦
$1.6 million increase in property expenses due to an increase in repairs and maintenance, security, janitorial, contract services, and various other reimbursable expenses, including a $0.3 million increase in non-reimbursable expenses;

•
An increase in Net Operating Income of $6.3 million attributable to the Stabilized Development Properties;

•
An increase in Net Operating Income of $5.1 million attributable to the Acquisition Properties;

•
An increase in Net Operating Income of $1.1 million attributable to the Dispositions and Other Properties primarily due to a $1.0 million net fee received for the termination of a letter of intent at one of our development properties.

Other Expenses and Income

General and Administrative Expenses

General and administrative expenses increased by approximately $0.3 million , or 2.3% , for the three months ended June 30, 2017 compared to the three months ended June 30, 2016 mainly due to an increase in compensation related expenses primarily related to growth of the Company.

Depreciation and Amortization

Depreciation and amortization increased by approximately $8.9 million , or 16.7% , for the three months ended June 30, 2017 compared to the three months ended June 30, 2016 primarily due to the following:

•
An increase of $4.7 million attributable to the Acquisition Properties;

•
An increase of $2.4 million attributable to the Stabilized Development Properties;

•
An increase of $2.1 million attributable to the Same Store Properties; and

•
A decrease of $0.3 million attributable to Dispositions & Other Properties.


36


Interest Expense

The following table sets forth our gross interest expense, including debt discounts/premiums and deferred financing cost amortization, net of capitalized interest, including capitalized debt discounts/premiums and deferred financing cost amortization for the three months ended June 30, 2017 and 2016 :

 
Three Months Ended June 30,
 
 
 
 
 
2017
 
2016
 
Dollar
Change
 
Percentage
Change  
 
(in thousands)
 
 
 
 
Gross interest expense
$
28,731

 
$
26,668

 
$
2,063

 
7.7
 %
Capitalized interest and deferred financing costs
(10,758
)
 
(12,284
)
 
1,526

 
(12.4
)%
Interest expense
$
17,973

 
$
14,384

 
$
3,589

 
25.0
 %

Gross interest expense, before the effect of capitalized interest and deferred financing costs, increased $2.1 million , or 7.7% , for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016 primarily due to an increase in the average outstanding debt balance for the three months ended June 30, 2017 . Capitalized interest and deferred financing costs decreased $1.5 million or 12.4% for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016 primarily due to a decrease in the average development asset balances qualifying for interest capitalization during the three months ended June 30, 2017 .

Net income attributable to noncontrolling interests in consolidated property partnerships

Net income attributable to noncontrolling interests in consolidated property partnerships increased $3.0 million for the three months ended June 30, 2017 compared to the three months ended June 30, 2016 . The amount reported for the three months ended June 30, 2017 is comprised of the noncontrolling interest’s share of net income for 100 First Street Member, LLC (“100 First LLC”) and 303 Second Street Member (“303 Second LLC”) which closed on August 30, 2016 and November 30, 2016, respectively, in addition to the noncontrolling interest’s share of net income for Redwood City Partners, LLC (“Redwood LLC”). The amount reported for the three months ended June 30, 2016 is comprised of the noncontrolling interest’s share of net income for Redwood LLC.


37

Comparison of the Six Months Ended June 30, 2017 to the Six Months Ended June 30, 2016

The following table summarizes our Net Operating Income, as defined, for our total portfolio for the  six months ended June 30, 2017 and 2016 .

 
Six Months Ended June 30,
 
Dollar
Change
 
Percentage
Change
 
2017
 
2016
 
 
($ in thousands)
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
 
 
 
 
 
 
 
Net Income Available to Common Stockholders
$
56,162

 
$
200,530

 
$
(144,368
)
 
(72.0
)%
Preferred dividends
4,966

 
6,625

 
(1,659
)
 
(25.0
)%
Original issuance costs of redeemed preferred stock and preferred units
3,845

 
—

 
3,845

 
100.0
 %
Net income attributable to Kilroy Realty Corporation
$
64,973

 
$
207,155

 
$
(142,182
)
 
(68.6
)%
Net income attributable to noncontrolling common units of the Operating Partnership
1,239

 
4,439

 
(3,200
)
 
(72.1
)%
Net income attributable to noncontrolling interests in consolidated property partnerships
6,375

 
411

 
5,964

 
1,451.1
 %
Net income
$
72,587

 
$
212,005

 
$
(139,418
)
 
(65.8
)%
Unallocated expense (income):
 
 
 
 
 
 
 
General and administrative expenses
29,236

 
27,416

 
1,820

 
6.6
 %
Acquisition-related expenses
—

 
776

 
(776
)
 
(100.0
)%
Depreciation and amortization
123,170

 
103,786

 
19,384

 
18.7
 %
Interest income and other net investment gains
(2,103
)
 
(582
)
 
(1,521
)
 
261.3
 %
Interest expense
35,325

 
26,213

 
9,112

 
34.8
 %
Net loss on sale of land
—

 
295

 
(295
)
 
(100.0
)%
Gains on sales of depreciable operating properties
(2,257
)
 
(145,990
)
 
143,733

 
(98.5
)%
Net Operating Income, as defined

$
255,958

 
$
223,919

 
$
32,039

 
14.3
 %

The following tables summarize our Net Operating Income, as defined, for our total portfolio for the six  months ended June 30, 2017 and 2016 .

 
Six Months Ended June 30,
 
2017
 
2016
 
Same Store
 
Stabilized
Develop-ment
 
Acquisition Properties
 
Dispositi-ons & Other
 
Total
 
Same Store
 
Stabilized
Develop-ment
 
Acquisition Properties
 
Dispositi-ons & Other
 
Total
 
(in thousands)
Operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
266,449

 
$
34,557

 
$
14,567

 
$
—

 
$
315,573

 
$
263,838

 
$
11,263

 
$
372

 
$
1,935

 
$
277,408

Tenant reimbursements
30,023

 
4,516

 
4,024

 
—

 
38,563

 
25,073

 
2,029

 
54

 
386

 
27,542

Other property income
4,227

 
150

 
405

 
988

 
5,770

 
609

 
7

 
—

 
13

 
629

Total
300,699

 
39,223

 
18,996

 
988

 
359,906

 
289,520

 
13,299

 
426

 
2,334

 
305,579

Property and related expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property expenses
53,827

 
8,192

 
2,433

 
93

 
64,545

 
50,560

 
3,209

 
10

 
1,407

 
55,186

Real estate taxes
25,846

 
4,861

 
3,473

 
327

 
34,507

 
22,377

 
1,748

 
17

 
735

 
24,877

Provision for bad debts
1,105

 
(116
)
 
718

 
—

 
1,707

 
—

 
—

 
—

 
—

 
—

Ground leases
1,992

 
—

 
1,197

 
—

 
3,189

 
1,597

 
—

 
—

 
—

 
1,597

Total
82,770

 
12,937

 
7,821

 
420

 
103,948

 
74,534

 
4,957

 
27

 
2,142

 
81,660

Net Operating Income,
as defined
$
217,929

 
$
26,286

 
$
11,175

 
$
568

 
$
255,958

 
$
214,986

 
$
8,342

 
$
399

 
$
192

 
$
223,919



38

 
Six Months Ended June 30, 2017 as compared to the Six Months Ended June 30, 2016
 
Same Store
 
Stabilized Development
 
Acquisition Properties
 
Dispositions & Other
 
Total
 
Dollar Change
 
Percent Change
 
Dollar Change
 
Percent Change
 
Dollar Change
 
Percent Change
 
Dollar Change
 
Percent Change
 
Dollar Change
 
Percent Change
 
($ in thousands)
Operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
2,611

 
1.0
%
 
$
23,294

 
206.8
 %
 
$
14,195

 
NM*

 
$
(1,935
)
 
(100.0
)%
 
$
38,165

 
13.8
%
Tenant reimbursements
4,950

 
19.7
%
 
2,487

 
122.6
 %
 
3,970

 
NM*

 
(386
)
 
(100.0
)%
 
11,021

 
40.0
%
Other property income
3,618

 
594.1
%
 
143

 
NM*

 
405

 
100.0
%
 
975

 
NM*

 
5,141

 
817.3
%
Total
11,179

 
3.9
%
 
25,924

 
194.9
 %
 
18,570

 
NM*

 
(1,346
)
 
(57.7
)%
 
54,327

 
17.8
%
Property and related expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property expenses
3,267

 
6.5
%
 
4,983

 
155.3
 %
 
2,423

 
NM*

 
(1,314
)
 
(93.4
)%
 
9,359

 
17.0
%
Real estate taxes
3,469

 
15.5
%
 
3,113

 
178.1
 %
 
3,456

 
NM*

 
(408
)
 
(55.5
)%
 
9,630

 
38.7
%
Provision for bad debts
1,105

 
100.0
%
 
(116
)
 
(100.0
)%
 
718

 
100.0
%
 
—

 
—
 %
 
1,707

 
100.0
%
Ground leases
395

 
24.7
%
 
—

 
—
 %
 
1,197

 
100.0
%
 
—

 
—
 %
 
1,592

 
99.7
%
Total
8,236

 
11.0
%
 
7,980

 
161.0
 %
 
7,794

 
NM*

 
(1,722
)
 
(80.4
)%
 
22,288

 
27.3
%
Net Operating Income,
as defined
$
2,943

 
1.4
%
 
$
17,944

 
215.1
 %
 
$
10,776

 
NM*

 
$
376

 
195.8
 %
 
$
32,039

 
14.3
%
________________________  
* Percentage not meaningful.

Net Operating Income increased $32.0 million , or 14.3% , for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 primarily resulting from:

•
An increase of $2.9 million attributable to the Same Store Properties primarily resulting from:

•
An increase in rental income of $2.6 million primarily due to the following:

•
$5.6 million increase due to new leases and renewals at higher rates primarily in the San Francisco Bay Area, Greater Seattle and Los Angeles regions;

•
$3.2 million decrease due to lease expirations and early terminations primarily in the San Francisco Bay area;

•
An increase in tenant reimbursements of $5.0 million primarily due to:

•
$1.6 million increase due to lower supplemental taxes in 2016 as a result of a change in estimate at one property;

•
$2.5 million increase due to higher recurring expenses and increased occupancy at various properties across multiple regions;

•
$0.9 million increase due to lower abated tenant reimbursements and tenants with 2016 base years;

•
An increase in other property income of $3.6 million primarily due to early termination fees in the San Francisco Bay area;

•
An increase in property and related expenses of $8.2 million primarily due to the following:

•
$3.5 million increase in real estate taxes primarily due to $2.6 million of lower supplemental taxes at five properties in 2016, a $0.2 million property tax refund at one property in 2016, and $0.6 million from regular annual property tax increases in 2017;

•
$3.3 million increase in property expenses primarily resulting from a $2.6 million increase in certain recurring operating costs related to security, parking, janitorial, engineers, repairs and maintenance, contract services, and various other reimbursable expenses and a $0.7 million increase in non-reimbursable expenses;

•
$1.1 million increase in the provision for bad debt expense primarily related to three tenants; and

•
$0.4 million increase in ground rent primarily due to higher percent ground rent for one of our ground leases;

39


•
An increase of $17.9 million attributable to the Stabilized Development Properties; and

•
An increase of $10.8 million attributable to the Acquisition Properties.

Other Expenses and Income

General and Administrative Expenses

General and administrative expenses increased $1.8 million , or 6.6% , for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the following:

•
An increase of approximately $1.4 million due to higher compensation and office expenses related to the growth of the Company; and

•
An increase of $0.4 million attributable to compensation expense due to the mark-to-market adjustment for the Company’s deferred compensation plan. The compensation expense was partially offset by gains on the underlying marketable securities included in interest income and other net investment gains in the consolidated statement of operations.

Depreciation and Amortization

Depreciation and amortization increased by $19.4 million , or 18.7% , for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 , primarily due to the following:

•
An increase of $10.2 million attributable to the Acquisition Properties;

•
An increase of $6.5 million attributable to the Stabilized Development Properties;

•
An increase of $3.3 million attributable to the Same Store Properties; offset by

•
A decrease of $0.7 million attributable to the Dispositions and Other Properties.

Interest Expense

The following table sets forth our gross interest expense, including debt discounts/premiums and deferred financing cost amortization, net of capitalized interest, including capitalized debt discounts/premiums and deferred financing cost amortization for the six months ended June 30, 2017 and 2016 :

 
Six Months Ended June 30,
 
 
 
 
 
2017
 
2016
 
Dollar
Change
 
Percentage
Change  
 
(in thousands)
 
 
 
 
Gross interest expense
$
56,246

 
$
52,843

 
$
3,403

 
6.4
 %
Capitalized interest and deferred financing costs
(20,921
)
 
(26,630
)
 
5,709

 
(21.4
)%
Interest expense
$
35,325

 
$
26,213

 
$
9,112

 
34.8
 %

Gross interest expense, before the effect of capitalized interest and deferred financing costs, increased $3.4 million or 6.4% for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 primarily due to an increase in the average outstanding debt balance for the six months ended June 30, 2017 . Capitalized interest and deferred financing costs decreased $5.7 million or 21.4% primarily due to a decrease in the average development asset balances qualifying for interest capitalization for the six months ended June 30, 2017 .


40

Net income attributable to noncontrolling interests in consolidated property partnerships

Net income attributable to noncontrolling interests in consolidated property partnerships increased $6.0 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 . The amount reported for the six months ended June 30, 2017 is comprised of the noncontrolling interest’s share of net income for 100 First LLC and 303 Second LLC, which closed on August 30, 2016 and November 30, 2016, respectively, in addition to the noncontrolling interest’s share of net income for Redwood LLC. The amount reported for the six months ended June 30, 2016 is comprised of the noncontrolling interest’s share of net income for Redwood LLC.

41

Liquidity and Capital Resources of the Company

In this “Liquidity and Capital Resources of the Company” section, the term the “Company” refers only to Kilroy Realty Corporation on an unconsolidated basis and excludes the Operating Partnership and all other subsidiaries.

The Company’s business is operated primarily through the Operating Partnership. Distributions from the Operating Partnership are the Company’s primary source of capital. The Company believes the Operating Partnership’s sources of working capital, specifically its cash flow from operations and borrowings available under its unsecured revolving credit facility and funds from its capital recycling program, including strategic ventures, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its preferred and common stockholders for the next twelve months. Cash flows from operating activities generated by the Operating Partnership for the six  months ended June 30, 2017 were sufficient to cover the Company’s payment of cash dividends to its stockholders. However, there can be no assurance that the Operating Partnership’s sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distributions to the Company. The unavailability of capital could adversely affect the Operating Partnership’s ability to make distributions to the Company, which would in turn, adversely affect the Company’s ability to pay cash dividends to its stockholders.

The Company is a well-known seasoned issuer and the Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company of its preferred stock, common stock, depositary shares, warrants and guarantees of debt securities and by the Operating Partnership of its debt securities, in each case in unlimited amounts. The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company and the Operating Partnership may issue securities of all of these types in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing and capital needs. When the Company receives proceeds from the sales of its preferred or common stock, it generally contributes the net proceeds from those sales to the Operating Partnership in exchange for corresponding preferred or common partnership units of the Operating Partnership. The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility, to develop new or existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.

As the sole general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes, and the Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are substantially the same on their respective financial statements. The section entitled “Liquidity and Capital Resources of the Operating Partnership” should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole.

Distribution Requirements

The Company is required to distribute 90% of its taxable income (subject to certain adjustments and excluding net capital gains) on an annual basis to maintain qualification as a REIT for federal income tax purposes and is required to pay income tax at regular corporate rates to the extent it distributes less than 100% of its taxable income (including capital gains). As a result of these distribution requirements, the Operating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent as other companies whose parent companies are not REITs. In addition, the Company may be required to use borrowings under the Operating Partnership’s revolving credit facility, if necessary, to meet REIT distribution requirements and maintain its REIT status. The Company may also need to continue to raise capital in the equity markets to fund the Operating Partnership’s working capital needs, as well as potential developments of new or existing properties or acquisitions.

The Company intends to continue to make, but has not committed to make, regular quarterly cash distributions to common stockholders, and through the Operating Partnership, common unitholders from the Operating Partnership’s cash flow from operating activities. All such distributions are at the discretion of the Board of Directors. As the Company intends to maintain distributions at a level sufficient to meet the REIT distribution requirements and minimize its obligation to pay income and excise taxes, it will continue to evaluate whether the current levels of distribution are sufficient to do so for 2017. In addition, in the event the Company is unable to identify and complete the acquisition of suitable replacement properties to effect Section 1031 Exchanges or is unable to successfully complete Section 1031 Exchanges to defer some or all of the taxable gains related to future property dispositions, the Company may elect to distribute a special dividend to its common stockholders and common unitholders in order to minimize income taxes on such gains. The Company considers market factors and its performance in addition to REIT requirements in determining its distribution levels. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts and short-term interest-bearing securities, which are consistent with the Company’s intention to

42

maintain its qualification as a REIT. Such investments may include, for example, obligations of the Government National Mortgage Association, other governmental agency securities, certificates of deposit, and interest-bearing bank deposits.

On May 23, 2017 , the Board of Directors declared a regular quarterly cash dividend of $0.425  per share of common stock payable on July 12, 2017 to stockholders of record on June 30, 2017 and caused a $0.425  per Operating Partnership unit cash distribution to be paid in respect of the Operating Partnership’s common limited partnership interests, including those owned by the Company. The total cash quarterly dividends and distributions paid on July 12, 2017 were $42.7 million .

On May 23, 2017 , the Board of Directors declared a dividend of $0.39844 per share on the Series H Cumulative Redeemable Preferred Stock (“Series H Preferred Stock”) for the period commencing on and including May 15, 2017 and ending on and including August 14, 2017. The dividend will be payable on August 15, 2017 to Series H Preferred stockholders of record on July 31, 2017 . The quarterly dividends payable on August 15, 2017 to Series H Preferred stockholders is expected to total $1.6 million .

Debt Covenants

The covenants contained within the unsecured revolving credit facility, unsecured term loan facility, unsecured term loan and the Series A and B Notes generally prohibit the Company from paying dividends in excess of 95% of FFO.

Capitalization

As of June 30, 2017 , our total debt as a percentage of total market capitalization was 25.2% and our total debt and liquidation value of our preferred equity as a percentage of total market capitalization was 26.2% , which was calculated based on the closing price per share of the Company’s common stock of $75.15 on June 30, 2017 as shown in the following table:
 
Shares/Units at 
June 30, 2017
 
Aggregate
Principal
Amount or
$ Value
Equivalent
 
% of Total
Market
Capitalization
 
($ in thousands)
Debt:  (1) (2)
 
 
 
 
 
Unsecured Term Loan Facility
 
 
$
150,000

 
1.5
%
Unsecured Term Loan
 
 
39,000

 
0.4
%
Unsecured Senior Notes due 2018
 
 
325,000

 
3.2
%
Unsecured Senior Notes due 2020
 
 
250,000

 
2.4
%
Unsecured Senior Notes due 2023
 
 
300,000

 
2.9
%
Unsecured Senior Notes due 2025
 
 
400,000

 
3.9
%
Unsecured Senior Notes due 2029
 
 
400,000

 
3.9
%
Unsecured Senior Notes Series A & B due 2027 & 2029
 
 
250,000

 
2.4
%
Secured debt
 
 
465,552

 
4.6
%
Total debt
 
 
$
2,579,552

 
25.2
%
Equity and Noncontrolling Interest in the Operating Partnership: (3)
 
 
 
 
 
6.375% Series H Cumulative Redeemable Preferred stock (4)
4,000,000

 
$
100,000

 
1.0
%
Common limited partnership units outstanding (5)(6)
2,077,193

 
156,101

 
1.5
%
Common shares outstanding (6)
98,351,217

 
7,391,094

 
72.3
%
Total equity and noncontrolling interest in the Operating Partnership
 
 
$
7,647,195

 
74.8
%
Total Market Capitalization
 
 
$
10,226,747

 
100.0
%
________________________ 
(1)
There was no outstanding balance on the unsecured revolving credit facility as of June 30, 2017 . In July 2017, the Operating Partnership amended and restated its unsecured revolving credit facility and unsecured term loan facility (together, the “Facility”).  Among other things, the amendment and restatement increased the size of the unsecured revolving credit facility from $600.0 million to $750.0 million , maintained the size of the unsecured term loan facility of $150.0 million , reduced the borrowing costs and extended the maturity date of the Facility to July 2022.  The unsecured term loan facility features two six-month delay draw options and the Facility was undrawn at closing, including the $150.0 million term loan, which was repaid in full at closing with available cash.  Concurrently with the closing of the Facility, the Operating Partnership repaid its $39.0 million unsecured term loan with available cash. 
(2)
Represents gross aggregate principal amount due at maturity before the effect of the following at June 30, 2017 : $12.0 million of unamortized deferred financing costs, $6.2 million of unamortized discounts for the unsecured senior notes and $3.5 million of unamortized premiums for the secured debt.
(3)
Includes common units of the Operating Partnership; does not include noncontrolling interests in consolidated property partnerships.
(4)
Value based on $25.00 per share liquidation preference. On July 12, 2017, the Company announced its intention to redeem all 4,000,000 shares of the 6.375% Series H Cumulative Redeemable Preferred Stock at par on August 15, 2017.
(5)
Represents common units not owned by the Company.
(6)
Value based on closing price per share of our common stock of $75.15 as of June 30, 2017 .


43


Liquidity and Capital Resources of the Operating Partnership

In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we,” “our,” and “us” refer to the Operating Partnership or the Operating Partnership and the Company together, as the context requires.

General

Our primary liquidity sources and uses are as follows:

Liquidity Sources

•
Net cash flow from operations;
•
Borrowings under the Operating Partnership’s unsecured revolving credit facility, unsecured term loan facility, and unsecured senior notes;
•
Proceeds from our capital recycling program, including the disposition of nonstrategic assets and the formation of strategic ventures;
•
Proceeds from additional secured or unsecured debt financings; and
•
Proceeds from public or private issuance of debt or equity securities.

Liquidity Uses

•
Development and redevelopment costs;
•
Operating property or undeveloped land acquisitions;
•
Property operating and corporate expenses;
•
Capital expenditures, tenant improvement and leasing costs;
•
Debt service and principal payments, including debt maturities;
•
Distributions to common and preferred security holders;
•
Repurchases and redemptions of outstanding common or preferred stock of the Company; and
•
Outstanding debt repurchases, redemptions and repayments.

General Strategy

Our general strategy is to maintain a conservative balance sheet with a strong credit profile and to maintain a capital structure that allows for financial flexibility and diversification of capital resources. We manage our capital structure to reflect a long-term investment approach and utilize multiple sources of capital to meet our long-term capital requirements. We believe that our current projected liquidity requirements for the next twelve-month period, as set forth above under the caption “—Liquidity Uses,” will be satisfied using a combination of the liquidity sources listed above, although there can be no assurance in this regard. We believe our conservative leverage and staggered debt maturities provide us with financial flexibility and enhances our ability to obtain additional sources of liquidity if necessary, and, therefore, we are well-positioned to refinance or repay maturing debt and to pursue our strategy of seeking attractive acquisition opportunities, which we may finance, as necessary, with future public and private issuances of debt and equity securities.





44

Liquidity Sources

Unsecured Revolving Credit Facility

The following table summarizes the balance and terms of our unsecured revolving credit facility as of June 30, 2017 and December 31, 2016 :
 
June 30, 2017
 
December 31, 2016
 
(in thousands)
Outstanding borrowings
$
—

 
$
—

Remaining borrowing capacity
600,000

 
600,000

Total borrowing capacity (1)
$
600,000

 
$
600,000

Interest rate (2)
2.27
%
 
1.82
%
Facility fee-annual rate (3)
0.200%
Maturity date
July 2019
________________________
(1)
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $311.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.
(2)
The interest rate on our unsecured revolving credit facility is based on an annual rate of LIBOR plus 1.050% .
(3)
Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of June 30, 2017 and December 31, 2016 , $2.6 million and $3.3 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.

We intend to borrow under the unsecured revolving credit facility from time to time for general corporate purposes, to finance development and redevelopment expenditures, to fund potential acquisitions and to potentially repay long-term debt.

In July 2017, the Operating Partnership amended and restated the terms of its unsecured revolving credit facility and unsecured term loan facility (together, the “Facility”). The amendment and restatement increased the size of the unsecured revolving credit facility from $600.0 million to $750.0 million , maintained the size of the unsecured term loan facility of $150.0 million , reduced the borrowing costs and extended the maturity date of the Facility to July 2022. The unsecured term loan facility features two six-month delayed draw options and the Facility was undrawn at closing, including the $150.0 million term loan, which was repaid in full at closing with available cash. Concurrently with the closing of the Facility, the Operating Partnership repaid its $39.0 million unsecured term loan with available cash.

Capital Recycling Program

As discussed in the section “ Factors That May Influence Future Results of Operations - Capital Recycling Program” we continuously evaluate opportunities for the potential disposition of properties and undeveloped land in our portfolio or the formation of strategic ventures with the intent of recycling the proceeds generated from the disposition of less strategic or lower return assets into capital used to finance development expenditures, to fund new acquisitions, to repay long-term debt and for other general corporate purposes. As part of this strategy, we attempt to enter into Section 1031 Exchanges, when possible, to defer some or all of the taxable gains on the sales, if any, for federal and state income tax purposes.

We currently anticipate that in 2017 we could raise capital through our capital recycling program ranging from approximately $100 million to $300 million, with a midpoint of $200 million, including the operating property disposition we completed in January 2017 for gross proceeds of $12.1 million. Any potential future capital recycling transactions and the timing of any potential future capital recycling transactions will depend on market conditions and other factors, including but not limited to our capital needs and our ability to defer some or all of the taxable gains on the sales. We cannot assure you that we will dispose of any additional properties, enter into any additional strategic ventures, or that we will be able to identify and complete the acquisition of a suitable replacement property to effect a Section 1031 Exchange or be able to use other tax deferred structures in connection with our capital recycling strategy.

At-The-Market Stock Offering Program and January 2017 Common Stock Offering

Since commencement of our at-the-market stock offering program in December 2014, through June 30, 2017 , we have sold 2,459,165 shares of common stock having an aggregate gross sales price of $182.4 million , and approximately $117.6 million remained available to be sold under this program. No shares of common stock were sold under this program during the six months ended June 30, 2017 . Actual future sales will depend upon a variety of factors, including but not limited to, market conditions,

45

the trading price of the Company’s common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under this program.

In January 2017, the Company completed an underwritten public offering of 4,427,500 shares of its common stock. The net offering proceeds, after deducting underwriting discounts and offering expenses, were approximately $308.8 million . We used a portion of the proceeds to partially fund our 2016 special dividend and will use the remaining proceeds for general corporate uses, to fund development expenditures, for potential future acquisitions and to repay outstanding indebtedness.

Shelf Registration Statement

As discussed above under “—Liquidity and Capital Resources of the Company,” the Company is a well-known seasoned issuer and the Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company of its preferred stock, common stock, depository shares and guarantees of debt securities and by the Operating Partnership of its debt securities, in each case in unlimited amounts. The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company and the Operating Partnership may issue securities of all of these types in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing and capital needs. When the Company receives proceeds from the sales of its preferred or common stock, it generally contributes the net proceeds from those sales to the Operating Partnership in exchange for corresponding preferred or common partnership units of the Operating Partnership. The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility, to develop new or existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.

Unsecured Senior Notes - Private Placement

On February 17, 2017, the Operating Partnership issued the $175.0 million principal amount of its 3.35% Senior Notes, Series A, due February 17, 2027 (the “Series A Notes”), and the $75.0 million principal amount of its 3.45% Senior Notes, Series B, due February 17, 2029 (the “Series B Notes” and, together with the Series A Notes, the “Series A and B Notes”). The Series A and B Notes were issued pursuant to a delayed draw option under a Note Purchase Agreement entered into in connection with a private placement in September 2016. As of June 30, 2017 , there was $175.0 million and $75.0 million issued and outstanding aggregate principal amount of Series A and B Notes, respectively. The Series A Notes mature on February 17, 2027, and the Series B Notes mature on February 17, 2029, unless earlier redeemed or prepaid pursuant to the terms of the Note Purchase Agreement. Interest on the Series A and B Notes is payable semi-annually in arrears on February 17 and August 17 of each year beginning August 17, 2017.

Unsecured and Secured Debt

The aggregate principal amount of the unsecured debt and secured debt of the Operating Partnership outstanding as of June 30, 2017 was as follows:
 
Aggregate Principal
 Amount Outstanding  (1)
 
(in thousands)
Unsecured Term Loan Facility (2)
$
150,000

Unsecured Term Loan  (2)
39,000

Unsecured Senior Notes due 2018
325,000

Unsecured Senior Notes due 2020
250,000

Unsecured Senior Notes due 2023
300,000

Unsecured Senior Notes due 2025
400,000

Unsecured Senior Notes due 2029
400,000

Unsecured Senior Notes Series A & B due 2027 & 2029
250,000

Secured Debt
465,552

Total Unsecured and Secured Debt
$
2,579,552

Less: Unamortized Net Discounts and Deferred Financing Costs
(14,711
)
Total Debt, Net
$
2,564,841

________________________
(1) There was no outstanding balance on the unsecured revolving credit facility as of June 30, 2017 .
(2) In July 2017, these loans were repaid in full in connection with the amendment and restatement of the unsecured revolving credit facility and unsecured term loan facility.

46


Debt Composition

Refer to our 2016 Annual Report on Form 10-K for our debt composition as of December 31, 2016. There were no material changes to our overall debt composition information including but not limited to secured to unsecured ratios, floating rate to fixed rate ratios, weighted average maturity and weighted average interest rate during the six months ended June 30, 2017 .

Liquidity Uses

Contractual Obligations

Refer to our 2016 Annual Report on Form 10-K for a discussion of our contractual obligations. There have been no material changes, outside of the ordinary course of business, to these contractual obligations during the six months ended June 30, 2017 .
 
Other Liquidity Uses

Development Activities

As of June 30, 2017 , we had four development projects under construction.  These projects have a total estimated investment of approximately $1.4 billion of which we have incurred approximately $617 million and committed an additional $588 million. Additionally, as of June 30, 2017 , we had committed approximately $36 million for recently completed development projects and we had approximately $6 million in potential future uncommitted tenant costs for two completed projects which may be spent during 2017 depending on leasing activity. Furthermore, we currently believe we may spend an additional $25 - $150 million on potential near-term and future development pipeline projects that we expect we may commence construction on during the remainder of 2017.  Ultimate timing of these expenditures may fluctuate given construction progress and leasing status of the projects.  We expect that any material additional development activities will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities or the disposition of assets under our capital recycling program.

6.875% Series G and 6.375% Series H Cumulative Redeemable Preferred Stock

On March 30, 2017, the Company redeemed all 4,000,000 shares of its Series G Preferred Stock. The shares of Series G Preferred Stock were redeemed at a redemption price of $25.00 per share plus accumulated and unpaid dividends for a total cash outflow totaling approximately $100.8 million. We have no further distribution requirements with respect to the Series G Preferred Stock. In connection with the redemption of the Series G Preferred Stock, we incurred an associated non-cash charge of $3.8 million as a reduction to net income available to common stockholders for the related original issuance costs.

On July 12, 2017, the Company announced its intent to redeem all 4,000,000 shares of its 6.375% Series H Preferred Stock on August 15, 2017 by payment of $25.00 per share in cash, totaling $100.0 million . Upon redemption of the outstanding Series H Preferred Stock, the Company will incur an associated non-cash charge of $3.7 million as a reduction to net income available to common stockholders in the third quarter of 2017 for the related original issuance costs.

Debt Maturities

We believe our conservative leverage and staggered debt maturities provide us with financial flexibility and enhance our ability to obtain additional sources of liquidity if necessary, and, therefore, we believe we are well-positioned to refinance or repay maturing debt and to pursue our strategy of seeking attractive acquisition opportunities, which we may finance, as necessary, with future public and private issuances of debt and equity securities. However, we can provide no assurance that we will have access to the public or private debt or equity markets in the future on favorable terms or at all. Our next debt maturity is scheduled to occur in February 2018, at which time there will be a principal payoff amount of $122.9 million . We have the option to prepay this debt without penalty in the fourth quarter of 2017. We also have an additional $325.0 million of unsecured senior notes maturing in July 2018.

Potential Future Acquisitions

As discussed in the section “Factors That May Influence Future Results of Operations - Acquisitions” we continue to evaluate strategic opportunities and remain a disciplined buyer of development and redevelopment opportunities as well as value-add operating properties, dependent on market conditions and business cycles, among other factors,  We continue to focus on growth opportunities in West Coast markets populated by knowledge and creative based tenants in a variety of industries, including

47

technology, media, healthcare, life sciences, entertainment and professional services.  Any material acquisitions will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, the formation of strategic ventures or through the assumption of existing debt. We cannot provide assurance that we will enter into any agreements to acquire properties, or undeveloped land, or that the potential acquisitions contemplated by any agreements we may enter into in the future will be completed.

Share Repurchases

On February 23, 2016, the Company’s Board of Directors approved a 4,000,000 share increase to the Company’s existing share repurchase program bringing the total current repurchase authorization to 4,988,025 shares. As of June 30, 2017 , 4,935,826 shares remain eligible for repurchase under the Company’s share repurchase program. Under this program, repurchases may be made in open market transactions at prevailing prices or through privately negotiated transactions. We may elect to repurchase shares of our common stock under this program in the future depending upon various factors, including market conditions, the trading price of our common stock and our other uses of capital. This program does not have a termination date, and repurchases may be discontinued at any time. We intend to fund repurchases, if any, primarily with the proceeds from property dispositions.

Other Potential Future Liquidity Uses

The amounts we are required to spend on tenant improvements and leasing costs we ultimately incur will depend on actual leasing activity. Tenant improvements and leasing costs generally fluctuate in any given period depending on factors such as the type of property, the term of the lease, the type of the lease, the involvement of external leasing agents, and overall market conditions. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to maintain or improve our properties.

Factors That May Influence Future Sources of Capital and Liquidity of the Company and the Operating Partnership

We continue to evaluate sources of financing for our business activities, including borrowings under the unsecured revolving credit facility, issuance of public and private equity securities, unsecured debt and fixed-rate secured mortgage financing, proceeds from the disposition of selective assets through our capital recycling program, and the formation of strategic ventures. However, our ability to obtain new financing or refinance existing borrowings on favorable terms could be impacted by various factors, including the state of the macro economy, the state of the credit and equity markets, significant tenant defaults, a decline in the demand for office properties, a decrease in market rental rates or market values of real estate assets in our submarkets, and the amount of our future borrowings. These events could result in the following:

•
Decreases in our cash flows from operations, which could create further dependence on the unsecured revolving credit facility;

•
An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and

•
A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership’s ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations.

In addition to the factors noted above, the Operating Partnership’s credit ratings are subject to ongoing evaluation by credit rating agencies and may be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. In the event that the Operating Partnership’s credit ratings are downgraded, we may incur higher borrowing costs and may experience difficulty in obtaining additional financing or refinancing existing indebtedness.


48

Debt Covenants

The unsecured revolving credit facility, unsecured term loan facility, unsecured term loan, unsecured senior notes, the Series A and B Notes and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. Key existing financial covenants and their covenant levels include:

Unsecured Credit Facility and Term Loan Facility (as defined in the applicable Credit Agreements)  (1)(2) :
 
Covenant Level
 
Actual Performance
as of June 30, 2017
Total debt to total asset value
 
less than 60%
 
26%
Fixed charge coverage ratio
 
greater than 1.5x
 
3.3x
Unsecured debt ratio
 
greater than 1.67x
 
4.04x
Unencumbered asset pool debt service coverage
 
greater than 1.75x
 
4.53x
 
 
 
 
 
Unsecured Senior Notes due 2018, 2020, 2023, 2025 and 2029
(as defined in the applicable Indentures):
 
 
 
 
Total debt to total asset value
 
less than 60%
 
33%
Interest coverage
 
greater than 1.5x
 
7.2x
Secured debt to total asset value
 
less than 40%
 
6%
Unencumbered asset pool value to unsecured debt
 
greater than 150%
 
317%
________________________
(1)
In July 2017, the Operating Partnership, amended and restated its unsecured revolving credit facility and unsecured term loan facility (together, the “Facility”). The covenants and actual performance metrics above represent terms and definitions reflected in the Facility based on financial results as of June 30, 2017.  As of June 30, 2017, the Operating Partnership was in compliance on both the prior Amended and Restated Credit Agreement dated as of June 23, 2014 as well as the Facility.
(2)
As of June 30, 2017 , the covenant performance under the Unsecured Senior Notes Series A and B due 2027 and 2029 (“private placement notes”), was substantially similar to the Facility; however, the unsecured debt ratio under the private placement notes was 3.66x reflecting definitional differences on unencumbered value. The Operating Partnership was in compliance under the credit agreement of the private placement notes as of June 30, 2017.

The Operating Partnership was in compliance with all of its debt covenants as of June 30, 2017 . Our current expectation is that the Operating Partnership will continue to meet the requirements of its debt covenants in both the short and long term. However, in the event of an economic slowdown or continued volatility in the credit markets, there is no certainty that the Operating Partnership will be able to continue to satisfy all of the covenant requirements.

Consolidated Historical Cash Flow Summary

The following summary discussion of our consolidated historical cash flow is based on the consolidated statements of cash flows in Item 1. “Financial Statements” and is not meant to be an all-inclusive discussion of the changes in our cash flow for the periods presented below. Changes in our cash flow include changes in cash and cash equivalents and restricted cash. Our historical cash flow activity for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 is as follows:

 
Six Months Ended June 30,
 
2017
 
2016
 
Dollar
Change
 
Percentage
Change
 
($ in thousands)
 
 
Net cash provided by operating activities
$
178,416

 
$
137,629

 
$
40,787

 
29.6
%
Net cash used in investing activities
(216,018
)
 
(39,069
)
 
(176,949
)
 
452.9
%
Net cash provided by financing activities
183,338

 
136,726

 
46,612

 
34.1
%

Operating Activities

Our cash flows from operating activities depends on numerous factors including the occupancy level of our portfolio, the rental rates achieved on our leases, the collectability of rent and recoveries from our tenants, the level of operating expenses, the impact of property acquisitions, completed development projects and related financing activities, and other general and administrative costs. Our net cash provided by operating activities increased by $40.8 million , or 29.6% , for the six months ended June 30, 2017 compared to the six months ended June, 30, 2016 primarily as a result of an increase in cash Net Operating Income generated from our Stabilized Development, Same Store and Acquisition Portfolios. See additional information under the caption “—Results of Operations.”


49

Investing Activities

Our cash flows from investing activities is generally used to fund development and operating property acquisitions, expenditures for development projects, and recurring and nonrecurring capital expenditures for our operating properties, net of proceeds received from dispositions of real estate assets. Our net cash used in investing activities increased by $176.9 million or 452.9% for the six months ended June 30, 2017 , compared to the six months ended June, 30, 2016 primarily due to significantly lower disposition activity during the six months ended June 30, 2017 .

Financing Activities

Our cash flows from financing activities is principally impacted by our capital raising activities, net of dividends and distributions paid to common and preferred security holders. Our net cash provided by financing activities increased $46.6 million or 34.1% for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to proceeds from the January 2017 common stock offering and the funding of the Company’s Series A and B Senior Notes, partially offset by the March 2017 redemption of the Series G Preferred Stock, the January 2017 payment of the special dividend declared in December 2016 and no borrowings on the unsecured revolving credit facility during the six months ended June 30, 2017 .

Off-Balance Sheet Arrangements

As of June 30, 2017 and as of the date this report was filed, we did not have any off-balance sheet transactions, arrangements or obligations, including contingent obligations.

50

Non-GAAP Supplemental Financial Measure: Funds From Operations

We calculate FFO in accordance with the White Paper on FFO approved by the Board of Governors of NAREIT. The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding extraordinary items, as defined by GAAP, gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders.
 
We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.

Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide.

However, FFO should not be viewed as an alternative measure of our operating performance because it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from operations.

The following table presents our FFO for the three and six months ended June 30, 2017 and 2016 :

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
(in thousands)
Net income available to common stockholders
$
29,833

 
$
29,535

 
$
56,162

 
$
200,530

Adjustments:
 
 
 
 
 
 
 
Net income attributable to noncontrolling common units of the Operating Partnership
616

 
829

 
1,239

 
4,439

Net income attributable to noncontrolling interests in consolidated property partnerships
3,242

 
216

 
6,375

 
411

Depreciation and amortization of real estate assets
61,000

 
52,463

 
120,734

 
102,127

Gains on sales of depreciable real estate
—

 
—

 
(2,257
)
 
(145,990
)
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships
(5,924
)
 
(321
)
 
(11,552
)
 
(602
)
Funds From Operations (1)(2)
$
88,767

 
$
82,722

 
$
170,701

 
$
160,915

________________________
(1)
Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(2)
FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $4.5 million and $3.2 million for the three months ended June 30, 2017 and 2016 , respectively, and $8.2 million and $6.1 million for the six months ended June 30, 2017 and 2016 , respectively.


51

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about our market risk is disclosed in Part II, Item 7A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 , and is incorporated herein by reference. There have been no material changes for the six months ended June 30, 2017 , to the information provided in Part II, Item 7A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 .

ITEM 4.
CONTROLS AND PROCEDURES

Kilroy Realty Corporation

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures as of June 30, 2017 , the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded, as of that time, the disclosure controls and procedures were effective at the reasonable assurance level.

There have been no significant changes that occurred during the quarter covered by this report in the Company’s internal control over financial reporting identified in connection with the evaluation referenced above that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Kilroy Realty, L.P.

The Operating Partnership maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the Operating Partnership’s reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), the Operating Partnership carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures as of June 30, 2017 , the end of the period covered by this report. Based on the foregoing, the Operating Partnership’s Chief Executive Officer and Chief Financial Officer concluded, as of that time, the disclosure controls and procedures were effective at the reasonable assurance level.

There have been no significant changes that occurred during the quarter covered by this report in the Operating Partnership’s internal control over financial reporting identified in connection with the evaluation referenced above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II – OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We and our properties are subject to routine litigation incidental to our business. These matters are generally covered by insurance. As of June 30, 2017 , we are not a defendant in, and our properties are not subject to, any legal proceedings that we believe, if determined adversely to us, would have a material adverse effect upon our financial condition, results of operations or cash flows.

ITEM 1A.
RISK FACTORS

There have been no material changes to the risk factors included in the Company’s and the Operating Partnership’s annual report on Form 10-K for the year ended December 31, 2016 .

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Recent Sales of Unregistered Securities: None.

(b) Use of Proceeds from Registered Securities: None.

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers:

The table below reflects our purchases of common stock during each of the three months in the three-month period ended June 30, 2017 .
Period
 
Total Number of Shares of Stock Purchased (1)
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number (or Approximate Dollar Value) that May Yet be Purchased Under the Plans or Programs
 
April 1, 2017 - April 30, 2017
 
122

 
$
72.98

 
—

 
—

 
May 1, 2017 - May 31, 2017
 
247

 
71.05

 
—

 
—

 
June 1, 2017 - June 30, 2017
 
—

 
—

 
—

 
—

 
Total
 
369

 
$
71.69

 
—

 
—

 
_______________
(1)
Includes shares of common stock remitted to the Company to satisfy tax withholding obligations in connection with the distribution of, or the vesting and distribution of, restricted stock units or restricted stock in shares of common stock. The value of such shares of common stock remitted to the Company was based on the closing price of the Company’s common stock on the applicable withholding date.


ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.
MINE SAFETY DISCLOSURES

None.


53

ITEM 5.
OTHER INFORMATION

On July 24, 2017, the Operating Partnership entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) led by J.P. Morgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, which acted as joint lead arrangers and joint bookrunners. JPMorgan Chase Bank, N.A. is the administrative agent, and Bank of America, N.A. was the syndication agent. PNC Capital Markets, LLC and U.S. Bank National Association acted as joint lead arrangers. Wells Fargo Bank, N.A., PNC Bank, National Association, U.S. Bank National Association, Bank of the West, Barclays Bank PLC, Compass Bank, MUFG Union Bank, N.A., Royal Bank of Canada and Sumitomo Mitsui Banking Corporation acted as co-documentation agents. Other participants in the Credit Agreement included Citibank, N.A., Comerica Bank, KeyBank National Association and The Bank of Nova Scotia.

The Credit Agreement consists of a $750.0 million unsecured revolving credit facility, a $150.0 million increase from the Company’s existing $600.0 million unsecured revolving credit facility, and a $150.0 million unsecured term loan facility. In addition, the Company may elect to borrow, subject to additional lender commitments and the satisfaction of certain conditions, up to an additional $600.0 million under the Credit Agreement for a maximum borrowing capacity of $1.5 billion. The Operating Partnership’s obligations under the Credit Agreement are guaranteed by the Company.

The Operating Partnership expects to use the proceeds from the unsecured revolving credit facility and unsecured term loan facility for general corporate purposes, including funding its development and redevelopment programs, opportunistic acquisitions and repaying long-term debt.
 
The unsecured revolving credit facility bears interest at an annual rate of LIBOR plus 0.825% to 1.550%, or Base Rate (as defined in the Credit Agreement) plus 0.000% to 0.550%, depending on the Company’s credit ratings. In addition, the Company is required to pay a facility fee of 0.125% to 0.300%, depending on the Company’s credit ratings. As of the date of this filing, the unsecured revolving credit facility bears interest at LIBOR plus 1.00% and has a 0.200% facility fee. The unsecured revolving credit facility matures on July 31, 2022.

The unsecured term loan facility bears interest at an annual rate of LIBOR plus 0.900% to 1.750%, or Base Rate plus 0.000% to 0.750%, depending on the Company’s credit ratings. In addition, the Company is required to pay a facility fee on undrawn commitments of 0.200%. The unsecured term loan facility features two, six-month delay draw options and, as of the date of this filing, bears interest at LIBOR plus 1.10%. The term loan facility matures on July 31, 2022.

The Credit Agreement contains covenants and restrictions requiring the Operating Partnership to meet certain financial ratios and to provide certain information to the lenders. Some of the more restrictive financial covenants include a (i) maximum total debt to total assets ratio, (ii) minimum fixed charge coverage ratio, (iii) maximum secured debt to total assets ratio, (iv) minimum unencumbered assets to unsecured debt ratio and (v) minimum unencumbered asset pool debt service coverage ratio. The Credit Agreement also contains limits on the percentage of the total assets that are attributable to development assets, joint ventures, mortgage and mezzanine notes, retail properties and land held for development for purposes of calculating these ratios. Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the unsecured revolving credit facility and unsecured term loan facility becoming immediately due and payable.

A copy of the Credit Agreement is filed as Exhibit 10.3 to this report and is incorporated herein by reference. The description of the Credit Agreement in this report is a summary and is qualified in its entirety by the terms of the Credit Agreement attached hereto as Exhibit 10.3.



54

ITEM 6.
EXHIBITS
 
Exhibit
Number
 
Description
 
 
 
3.(i)1
 
Kilroy Realty Corporation Articles of Restatement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended June 30, 2012)
 
 
 
3.(i)2
 
Certificate of Limited Partnership of Kilroy Realty, L.P. (previously filed by Kilroy Realty, L.P., as an exhibit to the General Form for Registration of Securities on Form 10 as filed with the Securities and Exchange Commission on August 18, 2010)
 
 
 
3.(i)3
 
Amendment to the Certificate of Limited Partnership of Kilroy Realty, L.P. (previously filed by Kilroy Realty, L.P., as an exhibit to the General Form for Registration of Securities on Form 10 as filed with the Securities and Exchange Commission on August 18, 2010)
 
 
 
3.(i)4
 
Articles Supplementary designating Kilroy Realty Corporation's 6.375% Series H Cumulative Redeemable Preferred Stock (previously filed by Kilroy Realty Corporation on Form 8-A as filed with the Securities and Exchange Commission on August 10, 2012)
 
 
 
3.(ii)1
 
Fifth Amended and Restated Bylaws of Kilroy Realty Corporation (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on February 1, 2017)
 
 
 
3.(ii)2
 
Seventh Amended and Restated Agreement of Limited Partnership of Kilroy Realty, L.P. dated as of August 15, 2012, as amended (previously filed by Kilroy Realty Corporation on Form 10-Q for the quarter ended June 30, 2014)
 
 
 
10.1
 
General Partner Guaranty Agreement, dated February 17, 2017 (previously filed by Kilroy Realty Corporation on Form 10-Q for the quarter ended March 31, 2017)
 
 
 
10.2 †
 
Kilroy Realty 2006 Incentive Award Plan (previously filed by Kilroy Realty Corporation on Form 8-K as filed with the Securities and Exchange Commission on May 23, 2017)
 
 
 
10.3*
 
Second Amended and Restated Credit Agreement dated as of July 24, 2017
 
 
 
10.4*
 
Second Amended and Restated Guaranty dated as of July 24, 2017
 
 
 
31.1*
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty Corporation
 
 
 
31.2*
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty Corporation
 
 
 
31.3*
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty, L.P.
 
 
 
31.4*
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty, L.P.
 
 
 
32.1*
 
Section 1350 Certification of Chief Executive Officer of Kilroy Realty Corporation
 
 
 
32.2*
 
Section 1350 Certification of Chief Financial Officer of Kilroy Realty Corporation
 
 
 
32.3*
 
Section 1350 Certification of Chief Executive Officer of Kilroy Realty, L.P.
 
 
 
32.4*
 
Section 1350 Certification of Chief Financial Officer of Kilroy Realty, L.P.
 
 
 
101.1
 
The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the quarter ended June 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Equity (unaudited), (iv) Consolidated Statements of Capital (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) Notes to the Consolidated Financial Statements (unaudited). (1)
_______________
*
Filed herewith
†
Management contract or compensatory plan or arrangement.
(1)
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.


55


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on July 27, 2017 .
 KILROY REALTY CORPORATION
 
 
 
 
By:
/s/ John Kilroy
 
 
John Kilroy
President and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
By:
/s/ Tyler H. Rose
 
 
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
By:
/s/ Heidi R. Roth
 
 
Heidi R. Roth
Executive Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
 

56


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on July 27, 2017 .
 KILROY REALTY, L.P.
 
 
BY:
KILROY REALTY CORPORATION
 
Its general partner
 
 
 
 
By:
/s/ John Kilroy
 
 
John Kilroy
President and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
By:
/s/ Tyler H. Rose
 
 
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
By:
/s/ Heidi R. Roth
 
 
Heidi R. Roth
Executive Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
 


57
Exhibit 10.3





SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of July 24, 2017
among
KILROY REALTY, L.P.
JPMORGAN CHASE BANK, N.A.,
as Bank and as Administrative Agent for the Banks,
JPMORGAN CHASE BANK, N.A., MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED OR ITS AFFILIATE and WELLS FARGO SECURITIES, LLC
as Joint Lead Arrangers and Joint Bookrunners,

PNC BANK, NATIONAL ASSOCIATION and U.S. BANK NATIONAL ASSOCIATION,
as Joint Lead Arrangers

BANK OF AMERICA, N.A.,
as Bank and Syndication Agent,

WELLS FARGO BANK, N.A., PNC BANK, NATIONAL ASSOCIATION,
U.S. BANK NATIONAL ASSOCIATION, BANK OF THE WEST, BARCLAYS BANK PLC,
COMPASS BANK, MUFG UNION BANK, N.A., ROYAL BANK OF CANADA and
SUMITOMO MITSUI BANKING CORPORATION,
as Banks and Co-Documentation Agents,
and
THE BANKS LISTED HEREIN


TABLE OF CONTENTS

        


 
 
Page
ARTICLE I
DEFINITIONS
1

Section 1.1
Definitions
1

Section 1.2
Accounting Terms and Determinations
33

Section 1.3
Types of Borrowings
33

ARTICLE II
THE CREDITS
34

Section 2.1
Commitments to Lend
34

Section 2.2
Notice of Committed Borrowing
35

Section 2.3
Money Market Borrowings
36

Section 2.4
Notice to Banks; Funding of Loans
40

Section 2.5
Notes
41

Section 2.6
Maturity of Loans
42

Section 2.7
Interest Rates
42

Section 2.8
Fees
44

Section 2.9
Mandatory Termination or Reduction
45

Section 2.10
Mandatory Prepayment
46

Section 2.11
Commitment Reductions; Optional Prepayments
47

Section 2.12
General Provisions as to Payments
48

Section 2.13
Funding Losses
50

Section 2.14
Computation of Interest and Fees
50

Section 2.15
Method of Electing Interest Rates
50

Section 2.16
Letters of Credit
51

Section 2.17
Letter of Credit Usage Absolute
54

Section 2.18
Swingline Loan Subfacility
55

Section 2.19
Extending Facilities
58

ARTICLE III
CONDITIONS
61

Section 3.1
Closing
61

Section 3.2
Borrowings
63

ARTICLE IV
REPRESENTATIONS AND WARRANTIES
64

Section 4.1
Existence and Power
64

Section 4.2
Power and Authority
64

Section 4.3
No Violation
65

Section 4.4
Financial Information
65

Section 4.5
Litigation
65

Section 4.6
Compliance with ERISA
66

Section 4.7
Environmental Compliance
66

Section 4.8
Taxes
67

Section 4.9
Full Disclosure
68

Section 4.10
Solvency
68

Section 4.11
Use of Proceeds; Margin Regulations
68

Section 4.12
Governmental Approvals
68


 
i

 

TABLE OF CONTENTS
(continued)



 
 
Page
Section 4.13
Investment Company Act
68

Section 4.14
Closing Date Transactions
68

Section 4.15
Representations and Warranties in Loan Documents
69

Section 4.16
Patents, Trademarks, etc
69

Section 4.17
No Default
69

Section 4.18
Licenses, etc
69

Section 4.19
Compliance with Law
69

Section 4.20
No Burdensome Restrictions
69

Section 4.21
Brokers' Fees
69

Section 4.22
Labor Matters
70

Section 4.23
Organizational Documents
70

Section 4.24
Principal Offices
70

Section 4.25
REIT Status
70

Section 4.26
Ownership of Property
70

Section 4.27
Insurance
70

Section 4.28
Anti-Corruption Laws and Sanctions
70

Section 4.29
EEA Financial Institutions
71

ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
71

Section 5.1
Information
71

Section 5.2
Payment of Obligations
73

Section 5.3
Maintenance of Property; Insurance
74

Section 5.4
Conduct of Business
74

Section 5.5
Compliance with Laws
74

Section 5.6
Inspection of Property, Books and Records
75

Section 5.7
Existence
75

Section 5.8
Financial Covenants
75

Section 5.9
Restriction on Fundamental Changes; Operation and Control
76

Section 5.10
Changes in Business
76

Section 5.11
Sale of Unencumbered Asset Pool Properties
77

Section 5.12
Fiscal Year; Fiscal Quarter
77

Section 5.13
Margin Stock
77

Section 5.14
Use of Proceeds
77

Section 5.15
General Partner Status
77

Section 5.16
Specified Unencumbered Real Property Assets; Specified Norges JV Assets
77

ARTICLE VI
DEFAULTS
78

Section 6.1
Events of Default
78

Section 6.2
Rights and Remedies
80

Section 6.3
Notice of Default
82

Section 6.4
Actions in Respect of Letters of Credit
82

ARTICLE VII
THE ADMINISTRATIVE AGENT
84


 
ii

 

TABLE OF CONTENTS
(continued)



 
 
Page
Section 7.1
Appointment and Authorization
84

Section 7.2
Administrative Agent and Affiliates
84

Section 7.3
Action by Administrative Agent
84

Section 7.4
Consultation with Experts
85

Section 7.5
Liability of Administrative Agent
85

Section 7.6
Indemnification
86

Section 7.7
Credit Decision
87

Section 7.8
Successor Administrative Agent
87

Section 7.9
Administrative Agent's Fee
88

Section 7.10
Copies of Notices
88

Section 7.11
Sub-Agents
88

ARTICLE VIII
CHANGE IN CIRCUMSTANCES
88

Section 8.1
Alternate Rate of Interest
88

Section 8.2
Illegality
89

Section 8.3
Increased Cost and Reduced Return
89

Section 8.4
Taxes
91

Section 8.5
Base Rate Loans Substituted for Affected Euro-Dollar Loans
95

Section 8.6
SPC Loans
96

Section 8.7
Mitigation Obligations; Replacement of Banks
97

ARTICLE IX
MISCELLANEOUS
98

Section 9.1
Notices
98

Section 9.2
No Waivers
100

Section 9.3
Expenses; Indemnification
100

Section 9.4
Sharing of Set-Offs
101

Section 9.5
Amendments and Waivers
102

Section 9.6
Successors and Assigns
103

Section 9.7
USA Patriot Act
106

Section 9.8
Defaulting Lenders
106

Section 9.9
Governing Law; Submission to Jurisdiction
109

Section 9.10
Marshaling; Recapture
109

Section 9.11
Counterparts; Integration; Effectiveness
109

Section 9.12
WAIVER OF JURY TRIAL
110

Section 9.13
Survival
110

Section 9.14
Domicile of Loans
110

Section 9.15
Limitation of Liability
110

Section 9.16
No Bankruptcy Proceedings
110

Section 9.17
Optional Increase in Commitments
110

Section 9.18
Severability
113

Section 9.19
Interest Rate Limitation
114

Section 9.20
Transitional Arrangements
114

Section 9.21
Confidentiality
115

 
 
 

 
iii

 

TABLE OF CONTENTS
(continued)



 
 
Page
Section 9.22
No Fiduciary Duty, etc.
115

Section 9.23
Acknowledgment and Consent to Bail-In of EEA Financial Institutions
116



 
iv

 


Exhibit A-1
-
Form of Revolving Note
Exhibit A-2
-
Form of Term Note
Exhibit A-3
-
Form of Designated Lender Note
Exhibit B
-
Unencumbered Asset Pool Properties (Fee Interests)
Exhibit C
-
Unencumbered Asset Pool Properties (Leasehold Interests)
Exhibit D
-
Form of Assignment and Assumption Agreement
Exhibit E
-
Form of Money Market Quote Request
Exhibit F
-
Form of Invitation for Money Market Quotes
Exhibit G
-
Form of Money Market Quote
Exhibit H
-
Form of Designation Agreement
Exhibit I-1
-
Form of U.S. Tax Compliance Certificate
Exhibit I-2
-
Form of U.S. Tax Compliance Certificate
Exhibit I-3
-
Form of U.S. Tax Compliance Certificate
Exhibit I-4
-
Form of U.S. Tax Compliance Certificate
 
 
 
Schedule 1A
-
Loan Commitments
Schedule 1B
-
Swingline Commitments and Swingline Lender Notice Information
Schedule 1C
-
Letter of Credit Commitments and Fronting Bank Notice Information
Schedule 4.22
-
Labor Matters
Schedule 5.16
-
Specified Unencumbered Real Property Assets; Specified Norges JV Assets


v


SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 24, 2017, among KILROY REALTY, L.P. (the “ Borrower ”), JPMORGAN CHASE BANK, N.A., as Bank and as Administrative Agent for the Banks (the “ Administrative Agent ”), JPMorgan Chase Bank, N.A., as Joint Lead Arranger and Joint Bookrunner, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED OR ITS AFFILIATE, as Joint Lead Arranger and Joint Bookrunner, WELLS FARGO SECURITIES, LLC, as Joint Lead Arranger and Joint Bookrunner, PNC BANK, NATIONAL ASSOCIATION, as Joint Lead Arranger, U.S. BANK NATIONAL ASSOCIATION, as Joint Lead Arranger, BANK OF AMERICA, N.A., as Bank and Syndication Agent, WELLS FARGO BANK, N.A., PNC BANK, NATIONAL ASSOCIATION, U.S. BANK NATIONAL ASSOCIATION, BANK OF THE WEST, BARCLAYS BANK PLC, COMPASS BANK, MUFG UNION BANK, N.A., ROYAL BANK OF CANADA and SUMITOMO MITSUI BANKING CORPORATION, as Banks and Co-Documentation Agents, and the BANKS listed on the signature pages hereof (the “ Banks ”).

RECITALS

WHEREAS, the Borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto are parties to an Amended and Restated Credit Agreement dated as of June 23, 2014 (the “ Existing Credit Agreement ”);
WHEREAS, the parties wish to amend and restate the Existing Credit Agreement in its entirety.
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Existing Credit Agreement in its entirety as follows:
ARTICLE I

DEFINITIONS
Section 1.1 Definitions . The following terms, as used herein, have the following meanings:

“ Absolute Rate Auction ” means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.3.
" Acquisition Property " means, as of any date of determination, any Real Property Assets acquired within such fiscal quarter and/or the immediately preceding three fiscal quarters.

“ Additional Credit Extension Amendment ” means an amendment to this Agreement providing for any Incremental Commitments which shall be consistent with the applicable provisions of this Agreement relating to such Incremental Commitments and otherwise reasonably satisfactory to the Administrative Agent and the Borrower.

“ Adjusted Annual EBITDA ” means, for any period, Annual EBITDA for such period, minus the sum of (a) interest income other than interest income from mortgage notes not

1



in excess of $10,000,000 per annum, and (b) a management fee reserve in an amount equal to 3% of consolidated total revenue (after deduction of interest income of the Borrower and its subsidiaries for such period), plus the sum of (a) general and administrative expenses for such period to the extent included in Annual EBITDA and (b) actual management fees relating to Real Property for such period.
“ Adjusted London Interbank Offered Rate ” has the meaning set forth in Section 2.7(b).
“ Administrative Agent ” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity.
“ Administrative Questionnaire ” means, with respect to each Bank, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank.
“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. In no event shall (x) the Administrative Agent or any Bank or (y) any other Person that is engaged in the business of making commercial loans (including revolving loans) in the ordinary course of business and for which the General Partner or the Borrower does not, directly or indirectly, possess the power to cause the direction of the investment policies of such Person be deemed to be an Affiliate of the Borrower.
“ Agency Site ” means the Electronic System established by the Administrative Agent to administer this Agreement.
“ Agent Party ” has the meaning set forth in Section 9.1(d)(ii) .
“ Agreement ” means this Second Amended and Restated Credit Agreement, as the same may from time to time hereafter be modified, supplemented or amended.
“ Aggregate Exposure ” means, with respect to any Bank at any time, an amount equal to the sum of (i) the amount of such Bank’s Term Loan Commitment then in effect plus the aggregate then unpaid principal amount of such Bank’s Term Loans and (ii) the amount of such Bank’s Revolving Commitment then in effect or, if the Revolving Commitments have been terminated, the amount of such Bank’s outstanding Revolving Loans.
“ Aggregate Exposure Percentage ” means, with respect to any Bank at any time, the ratio (expressed as a percentage) of such Bank’s Aggregate Exposure at such time to the Aggregate Exposures of all Banks at such time.
“ Annual EBITDA ” means, measured as of the last day of each calendar quarter (and without duplication), an amount derived from (i) total revenues relating to all Real Property Assets of the Borrower, the General Partner and their Consolidated Subsidiaries or to the Borrower’s or the General Partner’s interest in Minority Holdings for the previous four consecutive calendar quarters including the quarter then ended, on an accrual basis without giving effect to the straight-lining of rents, plus (ii) interest and other income of the Borrower,

2



the General Partner and their Consolidated Subsidiaries, including, without limitation, real estate service revenues, for such period, plus (iii) nonrecurring extraordinary losses (including losses from the sale of Real Property Assets and/or early extinguishment of Debt or the forgiveness of Debt) for such period, plus (iv) non-cash compensation expense for such period not in excess of $15,000,000 per annum, plus (v) costs and expenses incurred during such period with respect to acquisitions consummated during such period, less (vi) total operating expenses and other expenses relating to such Real Property Assets and to the Borrower’s and the General Partner’s interest in Minority Holdings for such period (other than interest, taxes, depreciation, amortization, and other non-cash items), less (vii) total corporate operating expenses (including general overhead expenses) and other expenses of the Borrower, the General Partner, their Consolidated Subsidiaries and the Borrower’s and the General Partner’s interest in Minority Holdings (other than interest, taxes, depreciation, amortization and other non-cash items), less (viii) gains from discontinued operations and extraordinary gains for such period, plus (ix) extraordinary losses for such period and less (x) nonrecurring extraordinary gains (including gains from the sale of Real Property Assets and/or the early extinguishment of Debt or the forgiveness of Debt) for such period. For purposes of this Agreement, Annual EBITDA shall be deemed to include only the Borrower’s pro rata share (such share being based upon the Borrower’s percentage ownership interest as shown on the Borrower’s annual audited financial statements) of the Annual EBITDA of any Person in which the Borrower, directly or indirectly, owns an interest.
“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Affiliates from time to time concerning or relating to bribery, corruption or money-laundering.
“ Applicable Interest Rate ” means the lesser of (x) the rate at which the interest rate applicable to any floating rate Debt could be fixed, at the time of calculation, by the Borrower entering into an unsecured interest rate swap agreement (or, if such rate is incapable of being fixed by entering into an unsecured interest rate swap agreement at the time of calculation, a reasonably determined fixed rate equivalent), and (y) the rate at which the interest rate applicable to such floating rate Debt is actually capped, at the time of calculation, if the Borrower has entered into an interest rate cap agreement with respect thereto or if the documentation for such Debt contains a cap.
“ Applicable Lending Office ” means, with respect to any Bank, (i) in the case of its Base Rate Loans and Swingline Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office, and (iii) in the case of its Money Market Loans, its Money Market Lending Office.
“ Applicable Margin ” means, (a) with respect to each Revolving Loan, the respective percentages per annum determined, at any time, based on the range into which Borrower’s Credit Rating then falls, in accordance with the following table:
Range of Borrower’s Credit Rating*
Applicable Margin for Euro-Dollar Revolving Loans
(% per annum)
Applicable Margin for Base Rate Revolving Loans
(% per annum)

3



A-/A3 or better
0.825%
—%
BBB+/Baal
0.875%
—%
BBB/Baa2
1%
—%
BBB-/Baa3
1.2%
0.2%
<BBB-/Baa3 or unrated
1.55%
0.55%
(b) with respect to each Term Loan, the respective percentages per annum determined, at any time, based on the range into which Borrower’s Credit Rating then falls, in accordance with the following table:
Range of Borrower’s Credit Rating*
Applicable Margin for Euro-Dollar Term Loans
(% per annum)
Applicable Margin for Base Rate Term Loans
(% per annum)
A-/A3 or better
0.900%
0.000%
BBB+/Baal
0.950%
0.000%
BBB/Baa2
1.100%
0.100%
BBB-/Baa3
1.350%
0.350%
<BBB-/Baa3 or unrated
1.750%
0.750%

* Applicable rating for purposes of determining the Applicable Margin is Borrower’s Credit Rating and if there are only two Borrower’s Credit Ratings, then it will be the higher of the two. In the event that the Borrower’s Credit Ratings are more than one level apart, the median rating will be used. If there are three Borrower’s Credit Ratings and such ratings are split, then, if the difference between the highest and lowest is one level apart, it will be the highest of the three, but if the difference is more than one level, the rating will be the average of the two highest (or if such average is not a recognized category, then the second highest rating will be used). If there is only one Borrower’s Credit Rating, the Applicable Margin shall be based on such rating.
Should Borrower (or General Partner) lose its Investment Grade Rating from both S&P and Moody’s, pricing will revert to the unrated portion of the table above. Upon reinstatement of such Investment Grade Rating from either S&P or Moody’s, pricing will revert to the rated pricing table above.
“ Approved Fund ” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Bank, (b) an Affiliate of a Bank or (c) an entity or an Affiliate of an entity that administers or manages a Bank.
“ Assignee ” has the meaning set forth in Section 9.6(c).
“ Availability Period ” has the meaning set forth in Section 2.9.
“ Bail-In Action ” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

4



“ Bail-In Legislation ” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“ Bank ” means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.6(c), and their respective successors and each Designated Lender; provided , however , that the term “ Bank ” shall exclude each Designated Lender when used in reference to a Committed Revolving Loan, the Revolving Commitments or terms relating to the Committed Revolving Loans and the Revolving Commitments and shall further exclude each Designated Lender for all other purposes hereunder except that any Designated Lender which funds a Money Market Loan shall, subject to Section 9.6(d), have the rights (including the rights given to a Bank contained in Section 9.3 and otherwise in Article 9) and obligations of a Bank associated with holding such Money Market Loan.
“ Bankruptcy Code ” means Title 11 of the United States Code, entitled “Bankruptcy”, as amended from time to time, and any successor statute or statutes.
“ Bankruptcy Event ” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, unless such ownership interest results in or provides such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permits such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person .
“ Base Rate ” means, for any day, a rate per annum equal to the highest of (i) the Prime Rate, (ii) the NYFRB Rate +.50% and (iii) one-month London Interbank Offered Rate (determined as though the interest period commenced as of the date of determination and based on the LIBO Screen Rate (or if the LIBO Screen Rate is not available for such one-month Interest Period, the Interpolated Rate)) + 1%. Any change in the Base Rate due to a change in the Prime Rate, the NYFRB Rate or the London Interbank Offered Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the London Interbank Offered Rate, respectively.
“ Base Rate Borrowing ” means a Borrowing comprised of Base Rate Loans.
“ Base Rate Loan ” means a Committed Loan to be made by a Bank as a Base Rate Loan in accordance with the applicable Notice of Borrowing or pursuant to Article VIII.

5



“ Benefit Arrangement ” means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.
“ Borrower ” means Kilroy Realty, L.P. and its successors.
“ Borrower’s Credit Rating ” means the rating assigned by the Rating Agencies to the General Partner’s or the Borrower’s senior unsecured long term indebtedness, or if no such rating is available, then the General Partner’s or the Borrower’s issuer rating.
“ Borrowing ” has the meaning set forth in Section 1.3.
“ Capital Expenditures ” means, for any period, the sum of all recurring expenditures on capital improvements (whether paid in cash or accrued as a liability) by the Borrower which are capitalized on the consolidated balance sheet of the Borrower in conformity with GAAP, but less (i) all expenditures made with respect to the acquisition by the Borrower and its Consolidated Subsidiaries of any interest in real property within nine months after the date such interest in real property is acquired and (ii) capital expenditures made from the proceeds of insurance or condemnation awards (or payments in lieu thereof) or indemnity payments received during such period by Borrower or any of its Consolidated Subsidiaries from third parties.
“ Cash or Cash Equivalents ” means (i) cash, (ii) direct obligations of the United States Government, including, without limitation, treasury bills, notes and bonds, (iii) interest bearing or discounted obligations of Federal agencies and Government sponsored entities or pools of such instruments offered by banks rated AA or better by S&P or Aa2 by Moody’s and dealers, including, without limitation, Federal Home Loan Mortgage Corporation participation sale certificates, Government National Mortgage Association modified pass-through certificates, Federal National Mortgage Association bonds and notes, Federal Farm Credit System securities, (iv) time deposits, domestic and Eurodollar certificates of deposit, bankers acceptances, commercial paper rated at least A-1 by S&P and P-1 by Moody’s, and/or guaranteed by an Aa rating by Moody’s, an AA rating by S&P, or better rated credit, floating rate notes, other money market instruments and letters of credit each issued by banks which have a long-term debt rating of at least AA by S&P or Aa2 by Moody’s, (v) obligations of domestic corporations, including, without limitation, commercial paper, bonds, debentures, and loan participations, each of which is rated at least AA by S&P, and/or Aa2 by Moody’s, and/or unconditionally guaranteed by an AA rating by S&P, an Aa2 rating by Moody’s, or better rated credit, (vi) obligations issued by states and local governments or their agencies, rated at least MIG-1 by Moody’s and/or SP-1 by S&P and/or guaranteed by an irrevocable letter of credit of a bank with a long-term debt rating of at least AA by S&P or Aa2 by Moody’s, (vii) repurchase agreements with major banks and primary government securities dealers fully secured by U.S. Government or agency collateral equal to or exceeding the principal amount on a daily basis and held in safekeeping, (viii) real estate loan pool participations, guaranteed by an entity with an AA rating given by S&P or an Aa2 rating given by Moody’s, or better rated credit, and (ix) shares of any mutual fund that has its assets primarily invested in the types of investments referred to in clauses (i) through (v).
“ Change in Law ” has the meaning set forth in Section 8.3.

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“ Charges ” has the meaning set forth in Section 9.19.
“ Class ” when used in reference to any Loan or Borrowing, refers to whether such Loan or the Loans comprising such Borrowing are Revolving Loans or Term Loans.
“ Closing Date ” has the meaning set forth in Section 3.1.
“ Commitment ” means, with respect to each Bank, its Revolving Commitment and/or its Term Loan Commitment, as the context may require.
“ Commitment Percentage ” means, with respect to each Bank, its Revolving Commitment Percentage and/or its Term Loan Commitment Percentage, as the context may require.

“ Committed Borrowing ” means a Committed Revolving Borrowing and/or a Committed Term Borrowing, as the context may require.
“ Committed Loans ” means Committed Revolving Loans and/or Committed Term Loans, as the context may require.
“ Committed Revolving Borrowing ” has the meaning set forth in Section 1.3.
“ Committed Revolving Loan ” means a Revolving Loan made by a Bank pursuant to Section 2.1(a); provided that, if any such Revolving Loan or Loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term “Committed Revolving Loan” shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be.
“ Committed Term Borrowing ” has the meaning set forth in Section 1.3.
“ Committed Term Loan ” means a Term Loan made by a Bank pursuant to Section 2.1(b) or Section 9.17; provided that, if any such Term Loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term “Committed Term Loan” shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be.
“ Communications ” has the meaning set forth in Section 9.1(d)(ii).
“ Completion of Construction ” means the issuance of a temporary or permanent certificate of occupancy for the improvements under construction, permitting the use and occupancy thereof for their regular intended uses.
“ Connection Income Taxes ” means Other Connection Taxes (which, for the avoidance of doubt, shall include Taxes imposed on one of the jurisdictional bases described in subsection (a)(i) of the definition of Excluded Taxes) that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

7



“ Consolidated Subsidiary ” means, at any date, any Subsidiary or other entity which is consolidated with the Borrower in accordance with GAAP.
“ Contingent Obligation ” as to any Person means, without duplication, (i) any guaranty of the principal of the Debt of any other Person, (ii) any contingent obligation of such Person with respect to Debt of any other Person required to be shown on such Person’s balance sheet in accordance with GAAP, and (iii) any obligation required to be disclosed in the footnotes to such Person’s financial statements, guaranteeing partially or in whole any non-recourse Debt, lease, dividend or other obligation, exclusive of contractual indemnities (including, without limitation, any indemnity or price-adjustment provision relating to the purchase or sale of securities or other assets) and guarantees of non-monetary obligations (other than guarantees of completion) which have not yet been called on or quantified, of such Person or of any other Person. The amount of any Contingent Obligation described in clause (iii) shall be deemed to be (a) with respect to a guaranty of interest or interest and principal, or operating income guaranty, the sum of all payments required to be made thereunder (which in the case of an operating income guaranty shall be deemed to be equal to the debt service for the note secured thereby), calculated at the Applicable Interest Rate, through (i) in the case of an interest or interest and principal guaranty, the stated date of maturity of the obligation (and commencing on the date interest could first be payable thereunder), or (ii) in the case of an operating income guaranty, the date through which such guaranty will remain in effect, and (b) with respect to all guarantees not covered by the preceding clause (a), an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as recorded on the balance sheet and on the footnotes to the most recent financial statements of the Borrower required to be delivered pursuant to Section 4.4 hereof. Notwithstanding anything contained herein to the contrary, guarantees of completion shall not be deemed to be Contingent Obligations unless and until a claim for payment or performance has been made thereunder, at which time any such guaranty of completion shall be deemed to be a Contingent Obligation in an amount equal to any such claim. Subject to the preceding sentence, (i) in the case of a joint and several guaranty given by such Person and another Person (but only to the extent such guaranty is recourse, directly or indirectly to the Borrower), the amount of the guaranty shall be deemed to be 100% thereof unless and only to the extent that such other Person has delivered Cash or Cash Equivalents to secure all or any part of such Person’s guaranteed obligations, (ii) in the case of joint and several guarantees given by a Person in whom the Borrower owns an interest (which guarantees are non-recourse to the Borrower), to the extent the guarantees, in the aggregate, exceed 15% of total real estate investments of such Person, the amount in excess of 15% shall be deemed to be a Contingent Obligation of the Borrower, and (iii) in the case of a guaranty (whether or not joint and several) of an obligation otherwise constituting Debt of such Person, the amount of such guaranty shall be deemed to be only that amount in excess of the amount of the obligation constituting Debt of such Person. Notwithstanding anything contained herein to the contrary, “Contingent Obligations” shall not be deemed to include guarantees of Unused Commitments or of construction loans to the extent the same have not been drawn.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to

8



exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.
“ Credit Party ” means the Administrative Agent, each Fronting Bank, each Swingline Lender or any other Bank.
“ Debt ” of any Person (including Minority Holdings) means, without duplication, (A) (i) the face amount of all indebtedness of such Person for borrowed money or for the deferred purchase price of property or any asset (other than current trade payables and accrued expenses payable in the ordinary course of business) and, (ii) the face amount of all indebtedness of such Person evidenced by a note, bond, debenture or similar instrument (whether or not disbursed in full in the case of a construction loan), (B) the face amount of all letters of credit issued for the account of such Person and, without duplication, all unreimbursed amounts drawn thereunder, (C) as shown on such Person’s balance sheet, all Contingent Obligations of such Person with respect to Debt of another other Person, (D) all “mark to market” liabilities of such Person under any interest rate protection agreement (including, without limitation, any interest rate swaps, caps, floors, collars and similar agreements) or other hedging agreements and currency swaps and foreign exchange contracts or similar agreements. For purposes of this Agreement, Debt (other than Contingent Obligations of the Borrower, General Partner or their Wholly-Owned Subsidiaries and Minority Holdings) of the Borrower (or the Borrower, the General Partner and their Consolidated Subsidiaries and Minority Holdings on a consolidated basis) shall be deemed to include only the Borrower's pro rata share (such share being based upon the Borrower's percentage ownership interest as shown on the Borrower's annual audited financial statements) of the Debt of any Person in which the Borrower, directly or indirectly, owns an interest, provided that such Debt is nonrecourse, both directly and indirectly, to the Borrower.
“ Default ” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
“ Defaulting Lender ” means any Bank that (a) has failed, within two Domestic Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Bank notifies the Administrative Agent in writing that such failure is the result of such Bank’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Bank’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Domestic Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Bank that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then

9



outstanding Letters of Credit and Swingline Loans under this Agreement, provided that such Bank shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has become the subject of a (A) Bankruptcy Event or (B) a Bail-In Action.
“ Designated Lender ” means a special purpose corporation that (i) shall have become a party to this Agreement pursuant to Section 9.6(d), and (ii) is not otherwise a Bank.
“ Designated Lender Notes ” means promissory notes of the Borrower, substantially in the form of Exhibit A-3 hereto, evidencing the obligation of the Borrower to repay Money Market Loans made by Designated Lenders, and “Designated Lender Note” means any one of such promissory notes issued under Section 9.6(d) hereof.
“ Designating Lender ” shall have the meaning set forth in Section 9.6(d) hereof.
“ Designation Agreement ” means a designation agreement in substantially the form of Exhibit H attached hereto, entered into by a Bank and a Designated Lender and accepted by the Administrative Agent.
“ Development Properties ” means any Real Property Assets which are 100% owned in fee (or leasehold pursuant to a Financeable Ground Lease) by the Borrower, the General Partner or any of their Consolidated Subsidiaries or any Minority Holdings and which are not subject to any Lien (other than Permitted Liens), and which are under development or redevelopment, provided that Real Property Assets shall cease to be Development Properties as of the earlier to occur of (a) the date which is eighteen (18) months after Completion of Construction thereof, and (b) the first fiscal quarter in which the occupancy rate of the applicable Development Property has averaged eighty-five percent (85%) or more.
“ Dollar ” and “ $ ” mean dollars which are the lawful money of the United States.
“ Domestic Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in New York City and Los Angeles are authorized by law to close.
“ Domestic Lending Office ” means, as to each Bank, its office located within the United States at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office within the United States as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent; provided that no Bank shall be permitted to change its Domestic Lending Office if as a result of such change either (i) pursuant to the provisions of Section 8.1 or Section 8.2, Borrower would be unable to maintain any Loans as Euro-Dollar Loans; or (ii) Borrower would be required to make any payment to such Bank pursuant to the provisions of Section 8.3 or Section 8.4.
“ EEA Financial Institution ” means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member

10



Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;

“ EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“ EEA Resolution Authority ” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

“ Electronic Signature ” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
“ Electronic System ” means any electronic system, including e-mail, e-fax, Intralinks®, ClearPar®, Debt Domain, Syndtrak and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Administrative Agent or any of its respective Related Persons or any other Person, providing for access to data protected by passcodes or other security system.
“ Eligible Assignee ” means (a) a Lender (other than a Defaulting Lender) or any Affiliate or Approved Fund thereof or (b) one or more banks, finance companies, insurance or other financial institutions which (1) has (or, in the case of a bank which is a subsidiary, such bank’s parent has) a rating of its senior debt obligations of not less than Baa-1 by Moody’s or a comparable rating by a rating agency acceptable to Administrative Agent, and (2) has total assets in excess of Ten Billion Dollars ($10,000,000,000).
“ Environmental Affiliate ” means any partnership, or joint venture, trust or corporation in which an equity interest is owned by the Borrower, either directly or indirectly.
“ Environmental Approvals ” means any permit, license, approval, ruling, variance, exemption or other authorization required under applicable Environmental Laws by a court or governmental agency having jurisdiction.
“ Environmental Claim ” means, with respect to any Person, any notice, claim, demand or similar communication (written or oral) by any other Person alleging potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damage, property damage, personal injuries, fines or penalties arising out of, based on or resulting from (i) the presence, or release into the environment, of any Material of Environmental Concern at any location, whether or not owned by such Person or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law, in each case as to which could reasonably be expected to have a Material Adverse Effect.
“ Environmental Laws ” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human

11



health or to emissions, discharges or releases of pollutants, contaminants, Material of Environmental Concern or hazardous wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Material of Environmental Concern or hazardous wastes or the clean-up or other remediation thereof.
“ Environmental Report ” has the meaning set forth in Section 4.7.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.
“ ERISA Group ” means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code.
“ EU Bail-In Legislation Schedule ” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“ Euro-Dollar Borrowing ” has the meaning set forth in Section 1.3.
“ Euro-Dollar Business Day ” means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London.
“ Euro-Dollar Lending Office ” means, as to each Bank, its office, branch or Affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or Affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent; provided that no Bank shall be permitted to change its Euro-Dollar Lending Office if as a result of such change either (i) pursuant to the provisions of Section 8.1 or Section 8.2, Borrower would be unable to maintain any Loans as Euro-Dollar Loans; or (ii) Borrower would be required make any payment to such Bank pursuant to the provisions of Sections 8.3 or Section 8.4.
“ Euro-Dollar Loan ” means a Committed Loan to be made by a Bank as a Loan bearing interest at the Adjusted London Interbank Offered Rate in accordance with the applicable Notice of Committed Borrowing or Notice of Interest Rate Election.
“ Euro-Dollar Reserve Percentage ” has the meaning set forth in Section 2.7(b).
“ Event of Default ” has the meaning set forth in Section 6.1.
“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch

12



profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Bank, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. Federal withholding Taxes imposed on amounts payable to or for the account of such Recipient with respect to an applicable interest in a Loan, Letter of Credit or Commitment pursuant to a law in effect on the date on which (i) such Recipient acquires such interest in the Loan, Letter of Credit or Commitment (other than pursuant to an assignment request by the Borrower under Section 8.7(b)) or (ii) in the case of a Bank, such Bank changes its lending office, except in each case to the extent that, pursuant to Section 8.4, amounts with respect to such Taxes were payable either to such Bank’s assignor immediately before such Bank acquired the applicable interest in a Loan, Letter of Credit or Commitment or to such Bank immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 8.4(f) and (d) any Taxes imposed under FATCA.
“ Existing Credit Agreement ” has the meaning set forth in the recitals.

“ Existing Loan Facility ” has the meaning set forth in Section 2.19(a).

“ Existing Term Loan Agreement ” means the Term Loan Agreement, dated as of July 31, 2014, by and among the Borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties party thereto from time to time.

“ Extended Loans ” has the meaning set forth in Section 2.19(a).

“ Extended Revolving Commitments ” has the meaning set forth in Section 2.19(a).

“ Extending Lender ” has the meaning set forth in Section 2.19(b).

“ Extension ” has the meaning set forth in Section 2.19(a).

“ Extension Election ” has the meaning set forth in Section 2.19(b).

“ Extension Request ” has the meaning set forth in Section 2.19(a).
“ Facility ” means each of the Term Loan Facility and the Revolving Credit Facility, and collectively, the “ Facilities ”.
“ FATCA ” means Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code (or any amended or successor version described above), and any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental agreement; provided, that if the definition of FATCA as generally accepted by major financial institutions in the REIT finance market shall change, the Banks

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agree to act in good faith to amend this definition so that it is consistent with such accepted definition.
“ Federal Funds Rate ” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions (as determined in such manner as the NYFRB shall set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as the federal funds effective rate.
“ Federal Reserve Board ” means the Board of Governors of the Federal Reserve System as constituted from time to time.
“ Financeable Ground Lease ” means (x) a ground lease reasonably satisfactory to the Required Banks, or (y) a ground lease which provides (i) for a remaining term of not less than 25 years (including options and renewals), (ii) that the ground lease will not be terminated until any leasehold mortgagee shall have received notice of a default and has had a reasonable opportunity to cure the same or complete foreclosure, and has failed to do so, (iii) for a new lease on substantially the same terms to any leasehold mortgagee recognized under such ground lease as tenant if the ground lease is terminated for any reason, (iv) for non-merger of the fee and leasehold estates, and (v) transferability of the tenant’s interest under the ground lease, subject only to the landlord’s reasonable approval. Notwithstanding the foregoing, it is hereby agreed that the ground lease with respect to the Real Property Asset commonly known as “Kilroy Airport Center, Long Beach, California”, shall be deemed to be a “Financeable Ground Lease”.
“ Fitch ” means Fitch, Inc. or any successor thereto.
“ FMV Cap Rate ” means (a) 6.00% for any office property (including any retail component in a mixed-use office project where the retail component contributes less than 15% of such project’s total revenues), (b) 6.00% for any multi-family residential property and (c) 6.75% for any retail property (other than any retail component of a mixed-use office property described in clause (a) above).
“ Foreign Bank ” means (a) if the Borrower is a U.S. Person, a Bank that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Bank that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.
“ Fronting Bank ” shall mean each of JPMorgan Chase Bank, N.A., Bank of America, N.A. and Wells Fargo Bank, N.A. and any other Bank that agrees to act as a Fronting Bank, each in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 9.6. Any Fronting Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Fronting Bank, in which case the term “Fronting Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. Each reference herein to the “Fronting Bank’ shall be deemed to be a reference to the relevant Fronting Bank.
“ GAAP ” means generally accepted accounting principles in the United States recognized as such in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession

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within the United States, which are applicable to the circumstances as of the date of determination.
“ General Partner ” means Kilroy Realty Corporation, a Maryland corporation.
“ Governmental Authority ” means any Federal, state or local government or any other political subdivision thereof or agency exercising executive, legislative, judicial, regulatory or administrative functions having jurisdiction over the Borrower or any Real Property Asset.
“ Group of Loans ” means, at any time, a group of Loans for each Class of Loan consisting of (i) all Committed Loans of such Class which are Base Rate Loans at such time, or (ii) all Committed Loans of such Class which are Euro-Dollar Loans having the same Interest Period at such time; provided that, if a Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Section 8.2 or 8.4, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made.
“ Guaranty ” means the Second Amended and Restated Guaranty, of even date herewith, made by the General Partner.
“ Impacted Interest Period ” has the meaning set forth in Section 2.7(b).
“ Increased Amount Date ” has the meaning set forth in Section 9.17(a).
“ Incremental Commitments ” has the meaning set forth in Section 9.17(a).
“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document and (b) to the extent not otherwise described in (a) hereof, Other Taxes.
“ Indemnitee ” has the meaning set forth in Section 9.3(b).
“ Initial Funding Date ” means the Closing Date on which all of the conditions described in Sections 3.1 and 3.2 have been satisfied (or waived) in a manner satisfactory to the Administrative Agent and the Banks and on which the initial Loans under this Agreement are made by the Banks to the Borrower.
“ Interest Period ” means: (i) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Committed Borrowing or of any Notice of Interest Rate Election with respect to such Committed Borrowing and ending one, two, three, six or, if available from all of the Banks, twelve months thereafter (or a period of seven (7) days, not more frequently than twice in any calendar quarter, unless any Bank has previously advised the Administrative Agent and the Borrower that it does not accept, in its sole discretion, the Offered Rate), as the Borrower may elect in the applicable Notice of Committed Borrowing or Notice of Interest Rate Election; provided that:
(a)    any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar

15



Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day;
(b)    any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; and
(c)    any Interest Period which would otherwise end after the applicable Maturity Date shall end on the applicable Maturity Date.
    
(ii) with respect to each Base Rate Borrowing, the period commencing on the date of such Committed Borrowing or Notice of Interest Rate Election and ending 30 days thereafter; provided that any Interest Period which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and provided that any Interest Period which would otherwise end after the Maturity Date shall end on the Maturity Date.
(iii) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending one, two, three or, if available from all applicable Banks, six months thereafter, as the Borrower may elect in the applicable Notice of Money Market Borrowing in accordance with Section 2.3; provided that:

(a)    any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day;
(b)    any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month;
(c)    if any Interest Period includes a date on which a payment of principal of Loans is required to be made under Section 2.10 but does not end on such date, then (i) the principal amount (if any) of each Money Market LIBOR Loan required to be repaid on such date and (ii) the remainder (if any) of each such Money Market LIBOR Loan shall have an Interest Period determined as set forth above; and
(d)    any Interest Period which would otherwise end after the Maturity Date shall end on the Maturity Date.
(iv) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and

16



ending such number of days thereafter (but not less than 14 days nor more than 180 days) as the Borrower may elect in accordance with Section 2.3; provided that:
(a)    any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day;
(b)    if any Interest Period includes a date on which a payment of principal of Loans is required to be made under Section 2.10 but does not end on such date, then (i) the principal amount (if any) of each Money Market Absolute Rate Loan required to be repaid on such date and (ii) the remainder (if any) of each such Money Market Absolute Rate Loan shall have an Interest Period determined as set forth above; and
(c)    any Interest Period which would otherwise end after the Maturity Date shall end on the Maturity Date.
“ Internal Revenue Code ” means the Internal Revenue Code of 1986, as amended, or any successor statute.
“ Interpolated Rate ” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period for which the LIBO Screen Rate is available for U.S. Dollars that is shorter than the Impacted Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which that Screen Rate is available for U.S. Dollars) that exceeds the Impacted Interest Period, in each case, at such time; provided that if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“ IntraLinks ” means an electronic service provider that provides a secure means to post information via the internet, at all times accessible by the Administrative Agent and the Banks.
“ Investment Grade Rating ” means a rating for a Person’s senior long-term unsecured debt, or if no such rating has been issued, a “shadow” rating, of BBB- or better from S&P, and a rating or “shadow” rating of Baa3 or better from Moody’s or a rating or “shadow” rating equivalent to the foregoing from Fitch. Any such “shadow” rating shall be evidenced by a letter from the applicable Rating Agency or by such other evidence as may be reasonably acceptable to the Administrative Agent (as to any such other evidence, the Administrative Agent shall present the same to, and discuss the same with, the Banks).
“ Joint Bookrunner ” shall mean each of JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Agreement) and Wells Fargo

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Securities, LLC in their respective capacities as joint bookrunner, and their respective successors in such capacity.
“ Joint Lead Arranger ” shall mean each of JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Agreement), Wells Fargo Securities, LLC, PNC Capital Markets LLC and U.S. Bank National Association in their respective capacities as joint lead arranger, and their respective successors in such capacity.
“ LC Disbursement ” means a payment made by a Fronting Bank pursuant to a Letter of Credit.
“ Letter(s) of Credit ” has the meaning provided in Section 2.2(b).
“ Letter of Credit Application ” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by and acceptable to the applicable Fronting Bank; in the event of any inconsistency between the terms of such Letter of Credit Application and this Agreement, the terms of this Agreement shall be controlling.
“ Letter of Credit Collateral ” has the meaning provided in Section 6.4.
“ Letter of Credit Collateral Account ” has the meaning provided in Section 6.4.
“ Letter of Credit Commitment ” means, with respect to each Fronting Bank, the commitment of such Fronting Bank to issue Letters of Credit hereunder. The initial amount of each Fronting Bank’s Letter of Credit Commitment is set forth on Schedule 1C, or if a Fronting Bank has entered into an Assignment and Assumption Agreement in the form of Exhibit D, the amount set forth for such Fronting Bank as its Letter of Credit Commitment in the Register maintained by the Administrative Agent.
“ Letter of Credit Documents ” has the meaning provided in Section 2.17.
“ Letter of Credit Usage ” means at any time the sum of (i) the aggregate maximum amount available to be drawn under the Letters of Credit then outstanding, assuming compliance with all requirements for drawing referred to therein, and (ii) the aggregate amount of the Borrower’s unpaid obligations under this Agreement in respect of the Letters of Credit.
“ LIBOR Auction ” means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.3.
“ LIBO Screen Rate ” has the meaning set forth in Section 2.7(b).
“ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes

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of this Agreement, each of the Borrower and any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.
“ Loan ” means a Revolving Loan and/or a Term Loan, as the context may require.
“ Loan Documents ” means this Agreement, the Notes, the Guaranty, the Letter(s) of Credit, the Letter of Credit Documents and any related documents.
“ Loan Extension Amendment ” has the meaning set forth in Section 2.19(c).
“ London Interbank Offered Rate ” has the meaning set forth in Section 2.7(b).
“ Majority Facility Banks ” means, with respect to any Facility, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans or the aggregate unpaid principal amount of the Revolving Loans, as the case may be, outstanding under such Facility (or, in the case of the Revolving Credit Facility prior to any termination of the Revolving Commitments, the holders of more than 50% of the Revolving Commitments, and, in the case of the Term Loan Facility, prior to the end of the Term Loan Commitment Period, the holders of more than 50% of the aggregate amount of (x) outstanding Term Loans and (y) undrawn Term Loan Commitments).
“ Mandatory Borrowing ” has the meaning set forth in Section 2.18(b)(iii).
“ Margin Stock ” shall have the meaning provided such term in Regulation U, Regulation T and Regulation X of the Federal Reserve Board.
“ Material Adverse Effect ” means a material adverse effect upon (i) the business, operations, properties or assets of the Borrower, General Partner and their Consolidated Subsidiaries, taken as a whole or (ii) the ability of the Borrower to perform its obligations hereunder in all material respects, including to pay interest and principal.
“ Material of Environmental Concern ” means and includes pollutants, contaminants, hazardous wastes, and toxic, radioactive, caustic or otherwise hazardous substances, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.
“ Material Plan ” means at any time a Plan having aggregate Unfunded Liabilities in excess of $5,000,000.
“ Material Subsidiary ” means any Subsidiary of the Borrower and/or the General Partner to which 10% or more of Total Asset Value is attributable.
“ Maturity Date ” means the Revolving Credit Maturity Date and/or a Term Loan Maturity Date, as the context may require.
“ Maximum Rate ” has the meaning set forth in Section 9.19.

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“ Minority Holdings ” means partnerships, limited liability companies and corporations held or owned by the Borrower which are not consolidated with the Borrower on its financial statements.
“ Money Market Absolute Rate ” has the meaning set forth in Section 2.3(d)(ii)(4).
“ Money Market Absolute Rate Loan ” means a Revolving Loan to be made by a Bank pursuant to an Absolute Rate Auction.
“ Money Market Lending Office ” means, as to each Bank, its Domestic Lending Office or such other office, branch or Affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require.
“ Money Market LIBOR Loan ” means a Revolving Loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 2.3).
“ Money Market Loan ” means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan.
“ Money Market Margin ” has the meaning set forth in Section 2.3(d)(ii)(3).
“ Money Market Quote ” means an offer by a Bank to make a Money Market Loan in accordance with Section 2.3.
“ Money Market Quote Request ” means a, invitation substantially in the form of Exhibit E hereto.
“ Moody’s ” means Moody’s Investors Service, Inc. or any successor thereto.
“ Multiemployer Plan ” means at any time a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period.
“ New Acquisition ” shall mean any Real Property Asset acquired after the date hereof.
“ New Revolving Commitments ” has the meaning set forth in Section 9.17(a).
“ New Revolving Credit Bank ” has the meaning set forth in Section 9.17(a).

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“ New Term Loan Commitments ” has the meaning set forth in Section 9.17(a).
“ New Term Loan ” has the meaning set forth in Section 9.17(e).
“ New Term Loan Bank ” has the meaning set forth in Section 9.17(a).
“ Non-Recourse Debt ” means Debt of the Borrower or the General Partner on a consolidated basis for which the right of recovery of the obligee thereof is limited to recourse against the Real Property Assets securing such Debt (subject to such limited exceptions to the non-recourse nature of such Debt such as fraud, misappropriation, misapplication and environmental indemnities, as are usual and customary in like transactions at the time of the incurrence of such Debt).
“ Notes ” means, collectively, the promissory notes of the Borrower, each substantially in the form of Exhibit A-1 or A-2 hereto, evidencing the obligation of the Borrower to repay the Loans, together with any Designated Lender Notes, and “Note” means any one of such promissory notes issued hereunder.
“ Notice of Borrowing ” means a Notice of Committed Borrowing or a Notice of Money Market Borrowing.
“ Notice of Committed Borrowing ” has the meaning set forth in Section 2.2.
“ Notice of Interest Rate Election ” has the meaning set forth in Section 2.15(a).
“ Notice of Money Market Borrowing ” has the meaning set forth in Section 2.3(f).
“ NYFRB ” means the Federal Reserve Bank of New York.

“ NYFRB Rate ” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received to the Administrative Agent from a Federal funds broker of recognized standing selected by it; provided, further , that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“ Obligations ” means all obligations, liabilities and indebtedness of every nature of the Borrower from time to time owing to any Bank under or in connection with this Agreement or any other Loan Document, including, without limitation, (i) the outstanding principal amount of the Committed Loans at such time, plus (ii) the Letter of Credit Usage at such time, plus (iii) the outstanding principal amount of any Money Market Loans at such time.
“ Offered Rate ” means a rate per annum quoted by the Administrative Agent, plus the Applicable Margin for the applicable Class of Euro-Dollar Loans, for an Interest Period of seven (7) days.
    

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“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising solely from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan, Letter of Credit or Loan Document).
“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 8.7).
“ Outstanding Balance ” means, the sum of (i) the aggregate outstanding and unpaid principal balance of all Revolving Loans and (ii) the Letter of Credit Usage.
“ Overnight Bank Funding Rate ” means, for any day, the rate comprised of both overnight federal funds and overnight Euro-Dollar Borrowings by U.S.-managed banking offices of depository institutions (as such composite rate shall be determined by the NYFRB as set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate (from and after such date as the NYFRB shall commence to publish such composite rate).
“ Parent ” means, with respect to any Bank, any Person as to which such Bank is, directly or indirectly, a subsidiary.
“ Participant Register ” has the meaning set forth in Section 9.6(b).
“ Participant ” has the meaning set forth in Section 9.6(b).
“ PBGC ” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
“ Permitted Liens ” means (a) Liens in favor of the Borrower or the General Partner on all or any part of the assets of Subsidiaries of the Borrower or the General Partner, as applicable, provided that (i) the Debt to which such Lien relates is held by the Borrower, (ii) such Debt is not otherwise pledged or encumbered, and (iii) no more than 5% of the Unencumbered Asset Pool Properties Value may be subject to any such Liens; (b) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds, completion bonds, government contracts or other obligations of a like nature, including Liens in connection with workers’ compensation, unemployment insurance and other types of statutory obligations or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Debt) and other similar obligations incurred in the ordinary course of business; (c) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided, that any reserve or other appropriate provision as shall be required in

22



conformity with GAAP shall have been made therefor; (d) Liens on property of the Borrower, the General Partner or any Subsidiary thereof in favor of the Federal or any state government to secure certain payments pursuant to any contract, statute or regulation; (e) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights of way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded), which do not interfere materially with the ordinary conduct of the business of the Borrower, the General Partner or any Subsidiary thereof and which do not materially detract from the value of the property to which they attach or materially impair the use thereof by the Borrower, the General Partner or any Subsidiary thereof; (f) statutory Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other Liens imposed by law and arising in the ordinary course of business, for sums due and payable which are not then past due (or which, if past due, are being contested in good faith and with respect to which adequate reserves are being maintained to the extent required by GAAP); (g) Liens not otherwise permitted by this definition and incurred in the ordinary course of business of any or all of the Borrower, the General Partner or any Subsidiary thereof with respect to obligations which do not exceed $500,000 in principal amount in the aggregate at any one time outstanding; and (h) the interests of lessees and lessors under leases of real or personal property made in the ordinary course of business which would not have a Material Adverse Effect.
“ Person ” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“ Plan ” means at any time an employee pension benefit plan (within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.
“ Prime Rate ” means the rate of interest publicly announced by the Administrative Agent in New York City from time to time as its Prime Rate.
“ Qualified Institution ” has the meaning set forth in Section 9.17(b).
“ Qualified Subsidiary ” means (a) a wholly-owned direct or indirect Subsidiary of the Borrower and/or the General Partner or (b) a Subsidiary of the Borrower (i) in which the Borrower owns at least 75% of the equity interests of such Subsidiary (other than the Subsidiary that owns the Specified Norges JV Assets, as long as such subsidiary is a Consolidated Subsidiary), (ii) for which the Borrower has sole control over all major decisions made by such Subsidiary (including, without limitation, decisions to sell or encumber property) (other than the Subsidiary that owns the Specified Norges JV Assets, as long as such subsidiary is a Consolidated Subsidiary) and (iii) for which the Borrower possesses ordinary voting power to

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elect a majority of the board of directors, or other persons performing similar functions, of such Subsidiary.
“ Quotation Date ” has the meaning set forth in Section 2.7(b).
“ Rating Agencies ” means, collectively, S&P, Moody’s and Fitch.
“ Real Property Assets ” means as of any time, the real property assets owned directly or indirectly by the Borrower, the General Partner, Minority Holdings and/or their Consolidated Subsidiaries at such time, and “ Real Property Asset ” means any one of them.
“ Recipient ” means (a) the Administrative Agent, (b) any Bank and (c) any Fronting Bank, as applicable.
“ Recourse Debt ” shall mean Debt of the Borrower, the General Partner or any Consolidated Subsidiary that is not Non-Recourse Debt.
“ Register ” has the meaning set forth in Section 9.6(g).
“ Regulation T ” means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time.
“ Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.
“ Regulation X ” means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time.
“ Regulatory Change ” has the meaning set forth in Section 8.3(a).
“ REIT ” has the meaning set forth in Section 3.1(o).
“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.
“ Release ” means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, deposit, discharge, leaching or migration.
“ Required Banks ” means, at any time, Banks having at least fifty-one percent (51%) of the aggregate amount of (x) the Revolving Commitments or, if the Revolving Commitments shall have been terminated, holding Notes evidencing at least fifty-one percent (51%) of the aggregate unpaid principal amount of the Revolving Loans (provided, that in the case of Swingline Loans, the amount of each Revolving Credit Bank’s funded participation interest in such Swingline Loans shall be considered for purposes hereof as if it were a direct loan and not a participation interest, and the aggregate amount of Swingline Loans owing to the Swingline Lenders shall be considered for purposes hereof as reduced by the amount of such funded participation interests) plus (y) the outstanding Term Loans plus (z) undrawn Term Loan

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Commitments; provided, however, that no Defaulting Lender shall be permitted to vote on any matter requiring the vote of the Required Banks and for purposes of determining the Required Banks, the Commitment of such Bank or the unpaid principal amount of Loans evidenced by Notes held by such Bank, as applicable, shall not be counted.
“ Required Revolving Credit Banks ” means, at any time, Revolving Credit Banks having at least fifty-one percent (51%) of the aggregate amount of the Revolving Commitments or, if the Revolving Commitments shall have been terminated, holding Notes evidencing at least fifty-one percent (51%) of the aggregate unpaid principal amount of the Revolving Loans (provided, that in the case of Swingline Loans, the amount of each Revolving Credit Bank’s funded participation interest in such Swingline Loans shall be considered for purposes hereof as if it were a direct loan and not a participation interest, and the aggregate amount of Swingline Loans owing to the Swingline Lenders shall be considered for purposes hereof as reduced by the amount of such funded participation interests); provided, however, that no Defaulting Lender shall be permitted to vote on any matter requiring the vote of the Required Revolving Credit Banks and for purposes of determining the Required Revolving Banks, the Revolving Commitment of such Revolving Credit Bank or the unpaid principal amount of Revolving Loans evidenced by Notes held by such Revolving Credit Bank, as applicable, shall not be counted.
“ Revolving Commitment ” means, with respect to each Bank, the commitment of such Bank to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as the maximum aggregate amount of such commitment, as such amount may be reduced from time to time pursuant to Sections 2.10(b) and 2.11(f), or increased pursuant to Section 9.17 (and including any Extended Revolving Commitment). The initial amount of each Bank’s Revolving Commitment is set forth on Schedule 1A, the Additional Credit Extension Amendment or in the Assignment and Assumption Agreement pursuant to which such Bank shall have assumed its Revolving Commitment.
“ Revolving Commitment Percentage ” means, with respect to any Revolving Credit Bank, the percentage of the total Revolving Commitments represented by such Bank’s Revolving Commitment. If the Revolving Commitments have expired or terminated, the Revolving Commitment Percentages shall be determined based on the Revolving Commitments most recently in effect, giving effect to any assignments.
“ Revolving Credit Banks ” means the Banks that hold a Revolving Commitment.
“ Revolving Credit Facility ” means the Revolving Commitments and the Revolving Loans and Swingline Loans made, and Letters of Credit issued, thereunder.
“ Revolving Credit Maturity Date ” means July 31, 2022, subject to extension (with respect to Extended Revolving Commitments and Revolving Loans that are Extended Loans only) as provided in Section 2.19.
“ Revolving Loan ” means a Base Rate Loan, a Euro-Dollar Loan, a Money Market Loan or a Swingline Loan and “Revolving Loans” means Base Rate Loans, Euro-Dollar Loans, Money Market Loans or Swingline Loans or any combination of the foregoing (including any Extended Loans that are Revolving Loans).

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“ Revolving Loan Amount ” means the sum of the Revolving Commitments, which amount initially is Seven Hundred Fifty Million and 00/100 Dollars ($750,000,000) (as adjusted pursuant to Sections 2.11(f) and 9.17).
“ S&P ” means S&P Global Ratings, or any successor thereto.
“ Sanctioned Country ” means, at any time, a country, region or territory which is the subject or target of any Sanctions (at the time of this Agreement, Cuba, Iran, North Korea, Sudan, Syria and Crimea).
“ Sanctioned Person ” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the U.S. Department of Commerce or the U.S. Department of the Treasury or by the United Nations Security Council, the European Union or any EU member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person fifty percent (50%) or more owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).
“ Sanctions ” economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state or Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.
“ Secured Debt ” means the portion of Total Debt that is secured by a Lien on real property.
“ Separate Parcel ” means a Real Property Asset that is a single, legally subdivided, separately zoned parcel that can be legally transferred or conveyed separate and distinct from any other Real Property Asset without benefit of any other Real Property Asset.
“ Solvent ” means, with respect to any Person, that the fair saleable value of such Person’s assets exceeds the Debts of such Person.
“ Specified Norges JV Assets ” means the assets listed on Schedule 5.16 as “Specified Norges JV Assets”.
“ Specified Unencumbered Real Property Asset ” means those specific Real Property Assets listed on Schedule 5.16 as “Specified Unencumbered Real Property Assets” (as such schedule may be updated by the Borrower for substitute properties with prior written notice to the Administrative Agent accompanied by a certificate of the Borrower as to absence of defaults under this Agreement and under the intercompany debt referenced below) that shall be treated as an Unencumbered Asset Pool Property despite such Real Property Asset being owned or leased by a Subsidiary of the Borrower that is subject to a pledge of the equity interest in such Subsidiary to another Subsidiary of the Borrower to secure intercompany debt, so long as (x) there is no default under such intercompany debt beyond any applicable notice and cure periods

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and (y) no repayments of principal of such intercompany debt are distributable to Persons other than the Borrower.
“ Subsidiary ” means any corporation or other entity of which securities or other ownership interests representing either (i) ordinary voting power to elect a majority of the board of directors or other persons performing similar functions or (ii) a majority of the economic interest therein, are at the time directly or indirectly owned by the Borrower.
“ Swingline Borrowing ” has the meaning set forth in Section 1.3.
“ Swingline Commitment ” means as to any Swingline Lender (i) the amount set forth opposite such Swingline Lender’s name on Schedule 1B hereof or (ii) if such Lender has entered into an Assignment and Assumption Agreement in the form of Exhibit D, the amount set forth for such lender as its Swingline Commitment in the Register maintained by the Administrative Agent.
“ Swingline Lenders ” means JPMorgan Chase Bank, N.A., Bank of America, N.A. and Wells Fargo Bank, N.A., each in their capacity as swingline lender hereunder, and their permitted successors in such capacity in accordance with the terms of this Agreement.
“ Swingline Loan ” means a loan made by a Swingline Lender pursuant to Section 2.18.
“ Swingline Loan Amount ” means the sum of the Swingline Commitments, which amount initially is Fifty Million and 00/100 Dollars ($50,000,000) (as adjusted pursuant to Section 2.11(f)).
“ Syndication Agent ” means Bank of America, N.A., in its capacity as syndication agent for the Banks, and its successors in such capacity.
“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“ Term Loan ” means a Loan made pursuant to Section 2.1(b) and including any incremental Term Loan made pursuant to Section 9.17 or any Extended Loans that are Term Loans.
“ Term Loan Amount ” means the sum of the Term Loan Commitments, which amount initially is One Hundred Fifty Million and 00/100 Dollars ($150,000,000) (as adjusted pursuant to Sections 2.11 and 9.17).
“ Term Loan Banks ” means the Banks that hold a Term Loan Commitment and/or Term Loans.
“ Term Loan Commitment ” means, with respect to each Bank, the commitment of such Bank to make Term Loans, as such amount may be reduced from time to time pursuant to Sections 2.9(b) and 2.11(g), or increased pursuant to Section 9.17. The initial amount of each

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Bank’s Term Loan Commitment is set forth on Schedule 1A, the Additional Credit Extension Amendment or in the Assignment and Assumption Agreement pursuant to which such Bank shall have assumed its Term Loan Commitment.
“ Term Loan Commitment Percentage ” means, with respect to any Term Loan Bank, the percentage of the total Term Loan Commitments represented by such Bank’s Term Loan Commitment.
“ Term Loan Commitment Period ” means the period from the Closing Date to the earlier to occur of (a) the date on which Term Loans have been made in an amount equal to the aggregate Term Loan Commitments, (b) 5:00 p.m., New York time, on the date that is twelve (12) months after the Closing Date, and (c) the date on which the Term Loan Commitments have been terminated pursuant to Section 6.2.
“ Term Loan Facility ” means the Term Loan Commitments and the Term Loans made thereunder.
“ Term Loan Maturity Date ” means July 31, 2022, subject to extension (with respect to Term Loans that are Extended Loans only) as provided in Section 2.19.
“ Term Loan Unused Fee ” has the meaning set forth in Section 2.8(d).
“ Total Asset Value ” means, the sum of (u) with respect to each Real Property Asset (excluding Acquisition Properties) for which there is a valid certificate of occupancy or a representation from the Borrower that it is legally permitted to occupy such Real Property Asset and is not less than 85% leased and occupied as of the last day of the applicable fiscal quarter, the quotient of (i) Adjusted Annual EBITDA (calculated after giving effect to any required free rent periods by calculating the average cash rent over the term of the lease during such free rent periods) with respect thereto for the previous four (4) consecutive quarters (or, if (A) owned for less than four (4) quarters, the Adjusted Annual EBITDA (calculated after giving effect to any required free rent periods by calculating the average cash rent over the term of the lease during such free rent periods) for such period, annualized, or (B) 85% leased and occupied for less than a full fiscal quarter, the Adjusted Annual EBITDA (calculated after giving effect to any required free rent periods by calculating the average cash rent over the term of the lease during such free rent periods) for the period so leased and occupied (whether or not owned for the previous four (4) fiscal quarters), annualized), including the quarter then ended, but less reserves for Capital Expenditures of (A) $0.25 per square foot per annum for each Real Property Asset that is an office or retail property, and (B) $250 per unit for each Real Property Asset that is a multi-family residential property, divided by (ii) the FMV Cap Rate, (v) with respect to each Real Property Asset (excluding Acquisition Properties) for which there is a valid certificate of occupancy or a representation from the Borrower that it is lawfully permitted to occupy such Real Property Asset but which is or has been less than 85% leased or occupied for four full consecutive fiscal quarters, an amount equal to 75% of the book value thereof, net of impairment charges, provided, however, that if any such Real Property Asset shall remain less than 85% leased or occupied for more than 24 consecutive months, then the value thereof shall be equal to 50% of book value, (w) with respect to each Acquisition Property, 100% of its book value (after any impairments), unless the Borrower has made a one-time election to value such Real Estate Asset in accordance

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with clause (u) or (v) hereof, (x) with respect to mortgage notes, mezzanine notes and other loans that are not more than 90 days past due and land held for future development, 100% of the book value thereof (after any impairments), ( y ) with respect to Development Properties, the lesser of (i) the cost actually paid by the Borrower, the General Partner or any of their Subsidiaries, and (ii) the market value, each as determined in accordance with GAAP, of such land or Development Properties, and (z) Unrestricted Cash or Cash Equivalents of the Borrower, the General Partner and their Subsidiaries as of the date of determination;

provided that (i) Total Asset Value shall include the Borrower’s and the General Partner’s pro rata share of each of the foregoing of any Minority Holdings of the Borrower or the General Partner, (ii) for purposes of determining Total Asset Value, the aggregate contributions to Total Asset Value from investments in land held for future development, Development Properties, mortgage notes, mezzanine notes and other loans, and joint ventures (whether consolidated or unconsolidated) shall not exceed 45% of Total Asset Value (and any amount in excess of 45% shall be excluded from the calculation of Total Asset Value), and (iii) for purposes of determining Total Asset Value, the contribution to Total Asset Value from Real Property Assets that are retail properties (other than the retail component of any mixed-use office project where the retail component contributes less than 15% of such project’s revenues) shall not exceed 10% of Total Asset Value (and any amount in excess of 10% shall be excluded from the calculation of Total Asset Value).

“ Total Debt ” means the sum of the balance sheet amount of all Debt of the Borrower, the General Partner and their Consolidated Subsidiaries on a consolidated basis plus the Borrower’s and the General Partner’s pro rata share of the Debt of any Minority Holdings of the Borrower and the General Partner. Total Debt shall not be determined in accordance with GAAP, but instead shall be equal to the sum of the face amount of each item of Debt.
“ Total Debt Ratio ” means the ratio, as of the date of determination, of (i) the sum of (x) the Total Debt of the Borrower, the General Partner and their Consolidated Subsidiaries and (y) the Borrower’s and the General Partner’s pro rata share of the Total Debt of any Minority Holdings of the Borrower or the General Partner to (ii) Total Asset Value.
“ Total Debt Service ” means, as of the last day of each calendar quarter, an amount equal to the sum of (i) interest (whether accrued, paid or capitalized) payable by the Borrower, the General Partner and their Consolidated Subsidiaries on Total Debt for the previous four consecutive quarters including the quarter then ended on a consolidated basis, plus (ii) scheduled payments of principal on such Total Debt, whether or not paid by the Borrower, the General Partner or their Consolidated Subsidiaries (excluding balloon payments) for the previous four consecutive quarters including the quarter then ended on a consolidated basis, plus (iii) the Borrower's and the General Partner's pro rata share of the Total Debt Service of any Minority Holdings of the Borrower or the General Partner. For purposes of this definition, interest and principal payable by Borrower, the General Partner or their Consolidated Subsidiaries on its Debt shall be deemed to include only such Person’s pro rata share (such share being based upon the Borrower's percentage ownership interest as shown on the Borrower's or General Partner’s annual audited financial statements) of such Debt of any Person in which the Borrower or General Partner, directly or indirectly, owns an interest.

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“ Unencumbered Asset Pool Net Operating Cash Flow ” means, as of any date of determination the Adjusted Annual EBITDA attributable to the Unencumbered Asset Pool Properties. Notwithstanding the foregoing, with respect to any Unencumbered Asset Pool Property owned by the Borrower, the General Partner or any of their Consolidated Subsidiaries for a period of less four (4) fiscal quarters, Unencumbered Asset Pool Net Operating Cash Flow shall be determined in a manner consistent with the foregoing calculation utilizing annualized Adjusted Annual EBITDA for the relevant period of the Borrower’s, the General Partner’s or any of their Consolidated Subsidiaries’ ownership of such Unencumbered Asset Pool Property.
“ Unencumbered Asset Pool Properties ” means, as of any date, the Real Property Assets listed in Exhibit B and Exhibit C attached hereto and made a part hereof, together with all Real Property Assets which have become part of the Unencumbered Asset Pool Properties as of such date, each of which is:
(i) located in the United States;
(ii) 100% owned in fee (or leasehold pursuant to a Financeable Ground Lease) by (x) the Borrower or (y) a Qualified Subsidiary that is not liable for any Debt for borrowed money (other than the Obligations hereunder) and is not the subject of a Bankruptcy Event;
(iii) either (w) (individually or when combined with any other Real Property Asset in a mixed-use complex) a completed office property, multi-family residential property or primarily a completed office property which may have secondary uses or any of the foregoing that is part of a mixed-use complex (including any retail component in a mixed-use project) or (x) a Development Property which will be any of the foregoing or (y) a mortgage note or (z) land held for future development;
(iv) not subject to any Lien (other than Permitted Liens);
(v) in the case of a Real Property Asset owned or leased by a Qualified Subsidiary, not subject to any agreement or arrangement by which the equity interests in such Qualified Subsidiary, or in any direct or indirect Subsidiary of the General Partner that owns equity interests in such Qualified Subsidiary, are subject to any Lien (other than Permitted Liens); and
(vi) not subject to any agreement or arrangement that prohibits or restricts the creation or assumption of any Lien on the assets of, or equity interests in, the Borrower or the Qualified Subsidiary that owns or leases such Real Property Asset (provided that this clause (vi) shall not prohibit an agreement that (a) is solely in favor of the Borrower or the General Partner; or (b) conditions a Person’s ability to encumber its assets upon the maintenance of one or more specified ratios or financial tests (including any financial ratio such as a maximum ratio of unsecured debt to unencumbered assets) that limit such Person’s ability to encumber its assets but that do not generally prohibit the encumbrance of its assets, or the encumbrance of specific assets).
“ Unencumbered Asset Pool Properties Value ” means the sum of:

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(i)    with respect to the Unencumbered Asset Pool Properties (excluding Acquisition Properties) for which there is a valid certificate of occupancy or a representation from the Borrower that it is legally permitted to occupy such Real Property Asset and which is not less than 85% leased and occupied as of the last day of the applicable fiscal quarter, the quotient of (x) the Unencumbered Asset Pool Net Operating Cash Flow (calculated after giving effect to any required free rent periods by calculating the average cash rent over the term of the lease during such free rent periods) with respect thereto for the previous four (4) consecutive quarters (or if (A) owned for less than four (4) quarters, the Unencumbered Asset Pool Net Operating Cash Flow (calculated after giving effect to any required free rent periods by calculating the average cash rent over the term of the lease during such free rent periods) for such period, annualized, or (B) 85% leased and occupied for less than a full fiscal quarter, the Unencumbered Asset Pool Net Operating Cash Flow (calculated after giving effect to any required free rent periods by calculating the average cash rent over the term of the lease during such free rent periods) for the period so leased and occupied (whether or not owned for the previous four (4) fiscal quarters), annualized), including the quarter then ended, but less reserves for Capital Expenditures of (A) $0.25 per square foot per annum for each Unencumbered Asset Pool Property that is an office or retail property, and (B) $250 per unit for each Real Property Asset that is a multi-family residential property, divided by (y) the FMV Cap Rate, provided, however, that if any such Unencumbered Asset Pool Property shall have been less than 85% leased and occupied for four (4) full consecutive fiscal quarters, then the value thereof shall be equal to an amount equal to 75% of the book value thereof, net of impairment charges, provided, however, that if any such Real Property Asset shall remain less than 85% leased or occupied for more than 24 consecutive months, then the value thereof shall be equal to 50% of book value; and
(ii)    with respect to the Unencumbered Asset Pool Properties which are Development Properties, mortgage notes that are not more than 90 days past due, or land held for future development, one hundred percent (100%) of (A) in the case of Development Properties, the lesser of (1) the cost actually paid by the Borrower, the General Partner or any of their Subsidiaries, and (2) the market value, each as determined in accordance with GAAP, of such Development Properties, and (B) in the case of mortgage notes or land held for future development, the book value thereof (after any impairments), determined in accordance with GAAP; and
(iii)     with respect to the Unencumbered Asset Pool Properties which are Acquisition Properties, 100% of book value (after any impairments) of such Acquisition Properties, unless, with respect to any Acquisition Property, the Borrower has made a one-time election to value such Acquisition Property in accordance with clause (i) of this definition; and
(iv)    Unrestricted Cash or Cash Equivalents of the Borrower, the General Partner and their Subsidiaries as of the date of determination;
provided that (A) to the extent that the aggregate amount of Unencumbered Asset Pool Properties Value attributable to Development Properties, mortgage notes, land held for future development, Real Property Assets owned or ground-leased by a Qualified Subsidiary that is not a wholly-owned Subsidiary of the Borrower (including the Specified Norges JV Assets), Real Property Assets that are not office properties (or primarily office properties with secondary uses)

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and Specified Unencumbered Real Property Assets exceeds 20% (or 25% if there is any Unencumbered Asset Pool Properties Value attributable to Specified Unencumbered Real Property Assets at such time) of the Unencumbered Asset Pool Properties Value, such excess will be excluded from the calculation of Unencumbered Asset Pool Properties Value, (B) to the extent that the amount of Unencumbered Asset Pool Properties Value attributable to Real Property Assets that are retail properties (other than the retail component of any mixed-use office project where the retail component contributes less than 15% of such project’s revenues) exceeds 10% of Unencumbered Asset Pool Properties Value, such excess shall be excluded from the calculation of Unencumbered Asset Pool Properties Value and (C) Unencumbered Asset Pool Properties Value shall include the Borrower’s and the General Partner’s pro rata share of each of the foregoing of any non-wholly-owned Subsidiary of the Borrower or the General Partner;

and provided further , that for purposes of determining the Unsecured Debt Ratio on any date of determination, Unencumbered Asset Pool Properties Value shall include any value attributable to the Specified Unencumbered Real Property Assets in an amount not to exceed 10% (or 15% if the loan documentation governing all other Indebtedness of the Borrower has also increased such limit to 15% or more) of the total Unencumbered Asset Pool Properties Value (including the Unencumbered Asset Pool Properties Value of such Specified Unencumbered Real Property Assets).

“ Unfunded Liabilities ” means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.
“ United States ” means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.
“ Unrestricted Cash or Cash Equivalents ” means Cash or Cash Equivalents, including the cash proceeds of any like-kind exchange under Section 1031 of the Internal Revenue Code, that is not subject to any pledge, lien or control agreement, less (i) $35,000,000 and (ii) amounts placed with third parties as deposits or security for contractual obligations.
“ Unsecured Debt ” means the portion of Total Debt that is not secured by a Lien on real property.
“ Unsecured Debt Ratio ” means (a) for purposes of calculating the financial covenants set forth in Section 5.8(d), the ratio of (i) the Unencumbered Asset Pool Properties Value as of the last day of the applicable fiscal quarter to (ii) the aggregate amount of Unsecured Debt outstanding as of the last day of the applicable fiscal quarter and (b) for all other purposes, as of any date, the ratio of (i) the Unencumbered Asset Pool Properties Value (calculated for all Unencumbered Asset Pool Properties as of such date, but, with respect to the Unencumbered Asset Pool Properties Value, determined as of the last date of the most recent fiscal quarter for

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which financial statements have been delivered), to (ii) the aggregate amount of Unsecured Debt outstanding as of such date.
“ Unsecured Debt Service ” means, for any calendar quarter, the interest actually payable (or accrued) on the Loans and all other Unsecured Debt.
“ Unused Commitments ” means an amount equal to all unadvanced funds (other than unadvanced funds in connection with any construction loan) which any third party is obligated to advance to the Borrower or otherwise, pursuant to any Loan Document, written instrument or otherwise.
“ U.S. Person ” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.
“ U.S. Tax Compliance Certificate ” has the meaning set forth in Section 8.4(f)(ii)(B)(3).
“ Withholding Agent ” means the Borrower and the Administrative Agent.
“ Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
Section 1.2 Accounting Terms and Determinations . Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Borrower’s independent public accountants) with the most recent audited consolidated financial statements of the Borrower delivered to the Administrative Agent and the Banks; provided that, if the Borrower notifies the Administrative Agent and the Banks that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. Notwithstanding the foregoing, leases shall continue to be classified and accounted for on a basis consistent with that reflected in the audited consolidated financial statements of the Borrower for the fiscal year December 31, 2016 for all purposes of this Agreement, notwithstanding any change in GAAP or change in the application of GAAP relating thereto, unless the Borrower and the Required Banks shall enter into a mutually acceptable amendment addressing such changes.

Section 1.3 Types of Borrowings . The term “Borrowing” denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on the same date, all of which Loans are of the same type (subject to Article VIII) and Class and, except in the case of Base Rate Loans, Money Market Absolute Rate Loans and Swingline

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Loans, have the same Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a “Euro-Dollar Borrowing” is a Borrowing comprised of Euro-Dollar Loans), Class (e.g. a Borrowing of Term Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a “Committed Revolving Borrowing” is a Borrowing under Section 2.1(a) in which all Revolving Credit Banks participate in proportion to their Revolving Commitments, a “Committed Term Borrowing” is a Borrowing under Section 2.1(b) in which all Term Loan Banks participate in proportion to their Term Loan Commitments, while a “Money Market Borrowing” is a Borrowing under Section 2.3, and a “Swingline Borrowing” is a Borrowing under Section 2.18 in which a Swingline Lender participates (subject to the provisions of said Section 2.18)).

ARTICLE II

THE CREDITS
Section 2.1 Commitments to Lend . (a) Each Revolving Credit Bank severally agrees, on the terms and conditions set forth in this Agreement, to make Committed Revolving Loans to the Borrower and participate in Letters of Credit issued by a Fronting Bank on behalf of the Borrower pursuant to this Section from time to time during the Availability Period in amounts such that the aggregate principal amount of Committed Revolving Loans by such Revolving Credit Bank at any one time outstanding plus such Revolving Credit Bank’s Revolving Commitment Percentage of Swingline Loans outstanding together with such Revolving Credit Bank’s Revolving Commitment Percentage of the Letter of Credit Usage shall not exceed the amount of its Revolving Commitment. The aggregate amount of Committed Revolving Loans to be made hereunder together with the Letter of Credit Usage, Swingline Loans and outstanding Money Market Loans shall not exceed the Revolving Loan Amount. Each Borrowing under this subsection (a) shall be in an aggregate principal amount of at least $2,500,000, or an integral multiple of $500,000 in excess thereof and, other than with respect to Money Market Loans and Swingline Loans, shall be made from the several Revolving Credit Banks ratably in proportion to their respective Revolving Commitments. Subject to the limitations set forth herein, any amounts repaid may be reborrowed.

(b) Each Term Loan Bank severally agrees, on the terms and conditions set forth in this Agreement, to make Term Loans to the Borrower pursuant to this Section from time to time during the Term Loan Commitment Period as requested by the Borrower in accordance with Section 2.2 in an amount not to exceed its Term Loan Commitment; provided that (i) if the Borrower does not make Borrowings of Term Loans in an aggregate principal amount of at least fifty percent (50%) of the total Term Loan Commitments as in effect on the Closing Date on or prior to January 24, 2018 then the Term Loan Commitments shall be reduced in accordance with Section 2.9(b), (ii) all Borrowings of Term Loans shall be made no later than the last day of the Term Loan Commitment Period, (iii) the aggregate principal amount of any such Borrowing of Term Loans shall not exceed the amount of the unused total Term Loan Commitments on the date of such Borrowing of Term Loans, and (iv) the principal amount of Term Loans made by any Term Loan Bank to the Borrower shall not exceed such Term Loan Bank’s Term Loan Commitment. The Term Loan Commitments of the Term Loan Banks to make the Term Loans (other than the New Term Loan Commitments, which shall be governed by Section 9.17) shall

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expire on the last day of the Term Loan Commitment Period (regardless of the failure of the Borrower to fully utilize the Term Loan Commitments) and the Term Loan Amount shall be reduced by the amount of such expired Term Loan Commitments. If the Term Loan Amount shall be increased in accordance with Section 9.17, each Term Loan Bank whose Term Loan Commitment shall have been increased in accordance therewith or who shall have become a Term Loan Bank hereunder, severally agrees, on the terms and conditions set forth in this Agreement, to make Term Loans to the Borrower pursuant to this Section from time to time in amounts such that the aggregate principal amount of Term Loans by such Term Loan Bank at any one time outstanding shall not exceed the amount of its Term Loan Commitment. The aggregate amount of Term Loans to be made hereunder shall not exceed the Term Loan Amount. Each Borrowing under this subsection (b) shall be in an aggregate principal amount of at least (i) with respect to the Term Loan Commitments in effect on the date hereof, $20,000,000, and (ii) otherwise, $10,000,000, or an integral multiple of $500,000 in excess thereof and shall be made from the several Term Loan Banks ratably in proportion to their respective Term Loan Commitments. Any Term Loans that are repaid may not be reborrowed.

Section 2.2 Notice of Committed Borrowing . (a) The Borrower shall give the Administrative Agent notice (a “Notice of Committed Borrowing”) not later than 2:00 p.m. (New York City time) (x) one Domestic Business Day before each Base Rate Borrowing, (y) three (3) Euro-Dollar Business Days before each Euro-Dollar Borrowing, or (z) three (3) Domestic Business Days before each Borrowing bearing interest at the Offered Rate, specifying:

(1) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Borrowing bearing interest at the Offered Rate or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,

(2) the aggregate amount of such Borrowing,

(3) the Class of such Borrowing,

(4) whether the Loans comprising such Borrowing are to be Base Rate Loans, Loans bearing interest at the Offered Rate or Euro-Dollar Loans,

(5) in the case of a Euro-Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period,

(6) the intended use for the proceeds of such Borrowing, and

(7) that no Default or Event of Default has occurred or is continuing.

Notwithstanding the time frame set forth in clause (a)(x) above, in the event that the Money Market Quotes submitted by the Revolving Credit Banks pursuant to Section 2.3(c) below are, in the aggregate, in an amount less than the principal amount requested by the Borrower in the related Money Market Quote Request, then the Borrower shall be permitted to give the

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Administrative Agent notice of its intent to make a Base Rate Revolving Borrowing, in the amount of the difference between accepted Money Market Quotes and the principal amount requested by Borrower in the related Money Market Quote Request, no later than 2:30 p.m. (New York City time) on the date of such Borrowing.
(b) The Borrower shall give the Administrative Agent, and the designated Fronting Bank(s), written notice, together with a Letter of Credit Application, in the event that it desires to have Letters of Credit (each, a “ Letter of Credit ”) issued hereunder no later than 2:00 p.m., New York City time, at least four (4) Domestic Business Days prior to the date of such issuance. Each such notice shall specify (i) the designated Fronting Bank(s), (ii) the aggregate amount of the requested Letters of Credit, (iii) the individual amount of each requested Letter of Credit and the number of Letters of Credit to be issued, (iv) the date of such issuance (which shall be a Domestic Business Day), (v) the name and address of the beneficiary, (vi) the expiration date of the Letter of Credit (which in no event shall be later than twelve (12) months after the issuance of such Letter of Credit or the Maturity Date, whichever is earlier), (vii) the purpose and circumstances for which such Letter of Credit is being issued, (viii) the terms upon which each such Letter of Credit may be drawn down (which terms shall not leave any discretion to such Fronting Bank) and (ix) a certification that the aggregate outstanding amount of all Letters of Credit issued by such Fronting Bank under this Agreement does not exceed its Letter of Credit Commitment. Each such notice may be revoked telephonically by the Borrower to the applicable Fronting Bank and the Administrative Agent any time prior to the date of issuance of the Letter of Credit by the applicable Fronting Bank(s), provided such revocation is confirmed in writing by the Borrower to such Fronting Bank(s) and the Administrative Agent within one (1) Domestic Business Day by facsimile. No later than 2:00 p.m., New York City time, on the date that is four (4) Domestic Business Days prior to the date of issuance, the Borrower shall specify a precise description of the documents and the verbatim text of any certificate to be presented by the beneficiary of such Letter of Credit, which if presented by such beneficiary prior to the expiration date of the Letter of Credit would require the applicable Fronting Bank to make a payment under the Letter of Credit; provided , that any Fronting Bank may, in its reasonable judgment, require changes in any such documents and certificates only in conformity with changes in customary and commercially reasonable practice or law and, provided further , that no Letter of Credit shall require payment against a conforming draft to be made thereunder on the following Domestic Business Day that such draft is presented if such presentation is made later than 10:00 A.M. New York City time (except that if the beneficiary of any Letter of Credit requests at the time of the issuance of its Letter of Credit that payment be made on the same Domestic Business Day against a conforming draft, such beneficiary shall be entitled to such a same day draw, provided such draft is presented to the applicable Fronting Bank no later than 10:00 A.M. New York City time and provided further the Borrower shall have requested to such Fronting Bank and the Administrative Agent that such beneficiary shall be entitled to a same day draw). In determining whether to pay on such Letter of Credit, such Fronting Bank shall be responsible only to determine that the documents and certificates required to be delivered under the Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit.

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Section 2.3 Money Market Borrowings .

(a) The Money Market Option . In addition to Committed Revolving Borrowings pursuant to Section 2.1(a), at such time as the Borrower’s Credit Rating is an Investment Grade Rating from at least two Rating Agencies, one of which shall be S&P or Moody’s, the Borrower may, as set forth in this Section 2.3, request the Revolving Credit Banks during the Availability Period to make offers to make Money Market Loans to the Borrower, not to exceed, at such time, the lesser of (i) the Revolving Loan Amount less the Outstanding Balance, and (ii) 50% of the Revolving Loan Amount. Such Revolving Credit Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section.

(b) Money Market Quote Request . When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit E hereto so as to be received not later than 2:00 p.m. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction, or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying:

(i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction,

(ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger multiple of $500,000,

(iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and

(iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate.

The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within thirty days (or such other number of days as the Borrower and the Administrative Agent may agree) of any other Money Market Quote Request.
(c) Invitation for Money Market Quotes . Promptly upon receipt of a Money Market Quote Request, the Administrative Agent shall send to the Revolving Credit Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit F hereto, which shall constitute an invitation by the Borrower to each Revolving Credit Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section 2.3.


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(d) Submission and Contents of Money Market Quotes . (i) Each Revolving Credit Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quote Request. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.1 not later than (x) 10:00 a.m. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or (y) 10:00 a.m. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Administrative Agent (or any Affiliate of the Administrative Agent) in the capacity of a Revolving Credit Bank may be submitted, and may only be submitted, if the Administrative Agent or such Affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than thirty (30) minutes prior to the applicable deadline for the other Revolving Credit Banks. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. Such Money Market Loans may be funded by such Revolving Credit Bank’s Designated Lender (if any) as provided in Section 9.6(d); however such Revolving Credit Bank shall not be required to specify in its Money Market Quote whether such Money Market Loans will be funded by such Designated Lender.

(ii) Each Money Market Quote shall be in substantially the form of Exhibit G hereto and shall in any case specify:

(1) the proposed date of Borrowing,

(2) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Revolving Commitment of the quoting Revolving Credit Bank, (x) must be $10,000,000 or a larger multiple of $500,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Revolving Credit Bank may be accepted,

(3) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the “ Money Market Margin ”) offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate,

(4) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the “ Money Market Absolute Rate ”) offered for each such Money Market Loan, and

(5) the identity of the quoting Revolving Credit Bank.


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A Money Market Quote may set forth up to five separate offers by the quoting Revolving Credit Bank with respect to each Interest Period specified in the related Money Market Quote Request.
(iii) Any Money Market Quote shall be disregarded if it:

(1) is not substantially in conformity with Exhibit G hereto or does not specify all of the information required by subsection (d)(ii) above;

(2) contains qualifying, conditional or similar language;

(3) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or

(4) arrives after the time set forth in subsection (d)(i).

(e) Notice to Borrower . The Administrative Agent shall promptly notify the Borrower (x) with respect to each Money Market Quote submitted in accordance with subsection (d), of the terms of such Money Market Quote and the identity of the Revolving Credit Bank submitting such Money Market Quote and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Revolving Credit Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent’s notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted.

(f) Acceptance and Notice by Borrower . Not later than 1:00 p.m. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Revolving Credit Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a “ Notice of Money Market Borrowing ”) shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that:

(i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request;

(ii) the principal amount of each Money Market Borrowing must be $10,000,000 or a larger multiple of $500,000;



39



(iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be; and

(iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement.

(g) Allocation by Administrative Agent . If offers are made by two or more Revolving Credit Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in multiples of $500,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error.

(h) Notification by Administrative Agent . Upon receipt of the Borrower’s Notice of Money Market Borrowing in accordance with Section 2.3(f) hereof, the Administrative Agent shall, on the date such Notice of Money Market Borrowing is received by the Administrative Agent, notify each Revolving Credit Bank of the principal amount of the Money Market Borrowing accepted by the Borrower and of such Revolving Credit Bank’s share (if any) of such Money Market Borrowing and such Notice of Money Market Borrowing shall not thereafter be revocable by the Borrower. A Revolving Credit Bank who is notified that it has been selected to make a Money Market Loan may designate its Designated Lender (if any) to fund such Money Market Loan on its behalf, as described in Section 9.6(d). Any Designated Lender which funds a Money Market Loan shall on and after the time of such funding become the obligee under such Money Market Loan and be entitled to receive payment thereof when due. No Revolving Credit Bank shall be relieved of its obligation to fund a Money Market Loan, and no Designated Lender shall assume such obligation, prior to the time the applicable Money Market Loan is funded.

Section 2.4 Notice to Banks; Funding of Loans .

(a) Upon receipt of a Notice of Committed Borrowing, the Administrative Agent shall notify each applicable Bank on the same day as it receives the Notice of Committed Borrowing of the contents thereof and of such Bank’s share of such Borrowing and such Notice of Committed Borrowing shall not thereafter be revocable by the Borrower.

(b) Not later than 2:00 P.M. (New York City time) on the date of each Committed Borrowing, each applicable Bank shall make available its share of such Committed Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.1. The Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent’s aforesaid address. If the Borrower has requested the issuance of a Letter of Credit, no later than 12:00 Noon (New York City time) on the date of such issuance as indicated in the notice delivered pursuant to Section 2.2(b), a Fronting Bank shall issue such Letter of Credit in

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the amount so requested and deliver the same to the Borrower with a copy thereof to the Administrative Agent. At the request of any Revolving Credit Bank, the Administrative Agent promptly shall deliver copies thereof to such Revolving Credit Bank. Immediately upon the issuance of each Letter of Credit by a Fronting Bank, such Fronting Bank shall be deemed to have sold and transferred to each other Revolving Credit Bank, and each such other Revolving Credit Bank shall be deemed, and hereby agrees, to have irrevocably and unconditionally purchased and received from such Fronting Bank, without recourse or warranty, an undivided interest and a participation in such Letter of Credit, any drawing thereunder, and the obligations of the Borrower hereunder with respect thereto, and any security therefor or guaranty pertaining thereto, in an amount equal to such Revolving Credit Bank’s ratable share thereof (based upon the ratio its Revolving Commitment bears to the aggregate of all Revolving Commitments). Upon any change in any of the Revolving Commitments in accordance herewith, there shall be an automatic adjustment to such participations to reflect such changed shares. The applicable Fronting Bank shall have the primary obligation to fund any and all draws made with respect to such Letter of Credit notwithstanding any failure of a participating Revolving Credit Bank to fund its ratable share of any such draw. Unless the Administrative Agent determines that any applicable condition specified in Article III has not been satisfied, the Administrative Agent will instruct the applicable Fronting Bank to make such Letter of Credit available to the Borrower and the applicable Fronting Bank shall make such Letter of Credit available to the Borrower at the Borrower’s aforesaid address or at such address in the United States as Borrower shall request on the date of the Borrowing.

(c) Not later than 3:00 p.m. (New York City time) on the date of each Swingline Borrowing as indicated in the applicable Notice of Committed Borrowing, the Swingline Lenders shall make available such Swingline Borrowing in Federal funds immediately available to the Administrative Agent at its address referred to in Section 9.1.

(d) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank’s share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.4 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.7 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank’s Loan included in such Borrowing for purposes of this Agreement.

Section 2.5 Notes .



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(a) At the request of any Bank, its Loans shall be evidenced by the Notes, each of which shall be payable to each applicable Bank for the account of its Applicable Lending Office in an amount equal to each such Bank’s Commitment.

(b) Each Bank may, by notice to the Borrower and the Administrative Agent, request that its Loans of a particular Class be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Bank’s Loans of such Class. Each such Note shall be in substantially the form of Exhibit A-1 or Exhibit A-2 hereto, as applicable, with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant Class for such Bank. Each reference in this Agreement to the “ Note ” of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require.

(c) Upon receipt of each Bank’s Note, the Administrative Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of its Notes a continuation of any such schedule as and when required.

(d) There shall be no more than fifteen (15) Euro-Dollar Revolving Borrowings, and no more than six (6) Euro-Dollar Term Loan Borrowings, outstanding at any one time pursuant to this Agreement.

Section 2.6 Maturity of Loans . The Revolving Loans, except as otherwise provided herein with respect to Swingline Loans or as otherwise provided in Section 6.2, shall mature, and the principal amount thereof shall be due and payable and the Borrower promises to pay the Revolving Loans, on the Revolving Credit Maturity Date. Swingline Loans shall mature, and the principal amount thereof shall be due and payable, and the Borrower promises to pay its Swingline Loans, in accordance with Section 2.18(b)(iii). The Term Loans shall mature, and the principal amount thereof shall be due and payable and the Borrower promises to pay the Term Loans, on the Term Loan Maturity Date.

Section 2.7 Interest Rates .

(a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the sum of the Applicable Margin for Base Rate Loans for the applicable Class of Loans plus the Base Rate for such day. Such interest shall be payable in arrears for each Interest Period on the last day thereof.

(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin for Euro-Dollar Loans for the applicable Class of

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Loans plus the Adjusted London Interbank Offered Rate for such day. Such interest shall be payable in arrears for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.
“ Adjusted London Interbank Offered Rate ” applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
“ Euro-Dollar Reserve Percentage ” means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage.
The “ London Interbank Offered Rate ” means, with respect to any Euro-Dollar Borrowing for any Interest Period, the LIBO Screen Rate at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; provided that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “ Impacted Interest Period ”) with respect to U.S. Dollars then the London Interbank Offered Rate shall be the Interpolated Rate. The “ LIBO Screen Rate ” means, for any day and time, with respect to any Euro-Dollar Borrowing for any Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for U.S. Dollars for a period equal in length to such Interest Period as displayed on such day and time on pages LIBOR01 or LIBOR02 of the Bloomberg screen that displays such rate (or, in the event such rate does not appear on a Bloomberg page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion, provided that, if the LIBO Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
The “ Quotation Date ” means, in relation to any period for which an interest rate is to be determined, two (2) Euro-Dollar Business Days before the first day of that period, unless market practice differs in the relevant interbank market for a currency, in which case the Quotation Date for that currency will be determined by the Administrative Agent in accordance with market practice in the London interbank market (and if quotations would normally be given by leading banks in the London interbank market on more than one day, the Quotation Date will be the last of those days).
(c) Subject to Section 8.1, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period

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(determined in accordance with Section 2.7(b) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Revolving Credit Bank making such Loan in accordance with Section 2.3. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Revolving Credit Bank making such Loan in accordance with Section 2.3. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 3 months, at intervals of 3 months after the first day thereof.

(d) Interest on all Loans bearing interest at the Offered Rate shall be payable for each applicable Interest Period on the last day thereof.

(e) In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal amount of the Loans, and, to the extent permitted by law, overdue interest in respect of all Loans, shall bear interest at the annual rate of the sum of the Base Rate and two percent (2%).

(f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.

Section 2.8 Fees .

(a) Facility Fee .

(i) During the Availability Period, the Borrower shall pay to the Administrative Agent for the account of the Revolving Credit Banks ratably in proportion to their respective Revolving Commitments, a facility fee on the full Revolving Loan Amount at the respective percentages per annum based upon the Borrower’s Credit Rating in accordance with the following table:
Borrower’s Credit Rating
Facility Fee
A-/A3 or better
0.125%
BBB+/Baa1
0.150%
BBB/Baa2
0.200%
BBB-/Baa3
0.250%
<BBB-/Baa3 or unrated
0.300%

(ii) The facility fee shall be payable at all times (quarterly in arrears), irrespective of usage, on each January 1, April 1, July 1, and October 1 during the Availability Period and any extensions thereof. Any change in the Borrower’s Credit Rating causing it to move into a different range on the table shall effect an immediate change in the applicable percentage per annum. If there are only two Borrower’s Credit Ratings, it will be the higher of the two. In the event that the Borrower’s Credit Ratings are more than one level apart, the median rating will be used. If there are three Borrower’s Credit Ratings, and such ratings are split, then, if the difference between the

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highest and lowest is one level apart, it will be the highest of the three, but if the difference is more than one level, the rating will be the average of the two highest (or if such average is not a recognized category, then the second highest rating will be used). If there is only one Borrower’s Credit Rating, the facility fee shall be based on such rating. Should Borrower (or General Partner) lose its Investment Grade Rating from both S&P and Moody’s, the facility fee will revert to the unrated portion of the table above. Upon reinstatement of such Investment Grade Rating from either S&P or Moody’s, the facility fee will revert to the rated pricing table above.

(b) Letter of Credit Fee . During the Availability Period, the Borrower shall pay to the Administrative Agent, for the account of the Revolving Credit Banks in proportion to their interests in respect of undrawn issued Letters of Credit, a fee (a “ Letter of Credit Fee ”) in an amount, provided that no Event of Default shall have occurred and be continuing, equal to a rate per annum equal to the Applicable Margin with respect to Euro-Dollar Revolving Loans on the daily outstanding balance of such issued and undrawn Letters of Credit, which fee shall be payable, in arrears, on each January 1, April 1, July 1 and October 1 during the Availability Period. From the occurrence, and during the continuance, of an Event of Default, such fee shall be increased to be equal to two percent (2%) per annum on the daily outstanding balance of such issued and undrawn Letters of Credit.

(c) Fronting Bank Fee . The Borrower shall pay any Fronting Bank, for its own account, a fee (a “ Fronting Bank Fee ”) at a rate per annum equal to 0.125% of the issued and undrawn amount of the Letters of Credit issued by such Fronting Bank (or such lesser amount as agreed to by the applicable Fronting Bank), in no cases less than $500, in addition to each Fronting Bank’s customary administrative charges related to the issuance or amendment of, or drawing upon, Letters of Credit, which fee shall be in addition to and not in lieu of, the Letter of Credit Fee. The Fronting Bank Fee shall be payable in arrears on each January 1, April 1, July 1 and October 1 during the Availability Period.

(d) Term Loan Commitment Fee . The Borrower shall pay to the Administrative Agent for the account of each Term Loan Bank (in accordance with its Term Loan Commitment Percentage), an unused fee (the “ Term Loan Unused Fee ”) which shall accrue and be payable on the daily amount of the unused Term Loan Commitments for the period beginning on the Closing Date, and continuing through the last day of the Term Loan Commitment Period, at a rate of 0.20% per annum on the sum of the average daily unused portion of the Term Loan Commitment. All Term Loan Unused Fees shall be fully earned when paid and nonrefundable under any circumstances. Accrued Term Loan Unused Fees shall be payable quarterly in arrears on the first day of each calendar quarter and on the last day of the Term Loan Commitment Period. All Term Loan Unused Fees shall be computed on the basis of a year of 365 or 366 days, as the case may be, and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(e) Fees Non-Refundable . All fees set forth in this Section 2.8 shall be deemed to have been earned on the date payment is due in accordance with the provisions hereof and shall be non-refundable. The obligation of the Borrower to pay such fees in accordance with the provisions hereof shall be binding upon the Borrower and shall inure to the benefit of the Administrative Agent and the Banks regardless of whether any Loans are actually made.


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Section 2.9 Mandatory Termination or Reduction . (a) Unless earlier terminated pursuant to Section 6.2, the term (the “ Availability Period ”) of the Revolving Commitments shall commence on the Closing Date and terminate and expire, and the Borrower shall return or cause to be returned all Letters of Credit to the Fronting Banks, on the Revolving Credit Maturity Date.

(b)    On January 24, 2018, if the Borrower has not made Borrowings of the Term Loans in an aggregate principal amount of at least equal to fifty percent (50%) of the total Term Loan Commitments as in effect on the Closing Date, then the total Term Loan Commitments will be reduced to two times the Borrowing of Term Loans made on or before such date and the Term Loan Amount shall be reduced by the amount of such reduction (for example, if the Borrower has made only $50,000,000 of Borrowings of Term Loans by January 24, 2018, then the available unused Term Loan Commitments shall be permanently reduced from $100,000,000 to $50,000,000 on such date). If requested by the Administrative Agent, the Borrower shall deliver to the Administrative Agent those notices required by Section 2.11(g) that are necessary to effectuate the reductions in the unused Term Loan Commitments described in the preceding sentence.
Section 2.10 Mandatory Prepayment . (a) In the event that an Unencumbered Asset Pool Property (or any Separate Parcel that originally formed a part of an Unencumbered Asset Pool Property) is sold, transferred or released from the restrictions of Section 5.11 hereof, the Borrower shall, simultaneously with such sale, transfer or release, prepay the Loans in an amount equal to 100% of the net proceeds of such sale or transfer, in the event of a sale or transfer, or such lesser amount as shall be required for the Borrower to remain in compliance with this Agreement, in the event of such a sale, transfer or release. Such prepayments shall be applied to either the Revolving Credit Facility or the Term Loan Facility as directed by the Borrower; provided, however, that if Borrower fails to give such direction, such prepayments shall first be applied to the Revolving Credit Facility, and then to the Term Loan Facility if such prepayment amounts are needed for the Borrower to remain in compliance with this Agreement. Notwithstanding the foregoing, a simultaneous like-kind exchange under Section 1031 of the Internal Revenue Code will not be subject to the provisions of this Section 2.10(a), provided that the exchanged property has qualified as a New Acquisition and any cash “boot” associated therewith shall be applied to prepayment of the Loans or such lesser amount of such cash “boot” as shall be required for the Borrower to remain in compliance with this Agreement. Sale of an Unencumbered Asset Pool Property (or any Separate Parcel that originally formed a part of a Unencumbered Asset Pool Property) in violation of this Section 2.10 shall constitute an Event of Default.

(b) In the event that the Unsecured Debt Ratio is not maintained as of the last day of a calendar quarter, either (i) the Borrower will add a Real Property Asset to the Unencumbered Asset Pool Properties in accordance with this Agreement which, on a pro forma basis ( i.e . the Unsecured Debt Ratio shall be recalculated to include such Real Property Asset as though the same had been an Unencumbered Asset Pool Property for the entire applicable period) would result in compliance with the Unsecured Debt Ratio, or (ii) the Borrower shall prepay to the Administrative Agent, for the account of the applicable Banks, an amount necessary to cause the Unsecured Debt Ratio to be in compliance within ninety (90) days of the date on which the Unsecured Debt Ratio failed to be maintained. Such prepayments shall be

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applied to either the Revolving Credit Facility or the Term Loan Facility as directed by the Borrower; provided, however, that if Borrower fails to give such direction, such prepayments shall first be applied to the Revolving Credit Facility, and then to the Term Loan Facility if such prepayment amounts are needed for the Borrower to remain in compliance with this Agreement. Failure by the Borrower to comply with the Unsecured Debt Ratio within ninety (90) days of the date of such non-compliance shall be an Event of Default.

Section 2.11 Commitment Reductions; Optional Prepayments .

(a) The Borrower may, upon at least one Domestic Business Day’s notice to the Administrative Agent, prepay to the Administrative Agent, for the account of the applicable Banks, any Base Rate Borrowing or Loans bearing interest at the Offered Rate in whole at any time, or from time to time in part in amounts aggregating One Million Dollars ($1,000,000), or an integral multiple of One Million Dollars ($1,000,000) in excess thereof or, if less, the outstanding principal balance, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. The Borrower may, from time to time on any Domestic Business Day so long as prior notice is given to the Administrative Agent and the Swingline Lenders no later than 1:00 p.m. (New York City time) on the day on which the Borrower intends to make such prepayment, prepay any Swingline Loans in whole or in part in amounts aggregating $100,000 or a higher integral multiple of $100,000 (or, if less, the aggregate outstanding principal amount of all Swingline Loans then outstanding) by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several applicable Banks (or the Swingline Lenders in the case of Swingline Loans) included in such Borrowing.

(b) Except as provided in Section 8.2, the Borrower may not prepay all or any portion of the principal amount of any Euro-Dollar Loan prior to the maturity thereof unless the Borrower shall also pay any applicable expenses pursuant to Section 2.13. Any such prepayment shall be upon at least one (1) Euro-Dollar Business Day’s notice to the Administrative Agent, and the Administrative Agent shall notify the applicable Banks of receipt of any such notice on the same Euro-Dollar Business Day as received by it. Any notice of prepayment delivered pursuant to this Section 2.11(b) shall set forth the amount of such prepayment which is applicable to any Loan made for working capital purposes. Each such optional prepayment shall be in the amounts set forth in Section 2.11(a) above and shall be applied to prepay ratably the Loans of the applicable Banks included in such Borrowing.

(c) The Borrower may not prepay any Money Market Loan.

(d) The Borrower may, upon at least one (1) Domestic Business Day’s notice to the Administrative Agent (by 2:00 p.m. New York time on such Domestic Business Day), reimburse the Administrative Agent for the benefit of the Fronting Banks for the amount of any drawing under a Letter of Credit in whole or in part in any amount.

(e) The Borrower may at any time return any undrawn Letter of Credit to a Fronting Bank in whole, but not in part, and such Fronting Bank shall give the Administrative Agent and each of the Revolving Credit Banks notice of such return.


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(f) The Borrower may at any time and from time to time cancel all or any part of the unused Commitments under the Revolving Credit Facility in amounts aggregating One Million Dollars ($1,000,000), or an integral multiple of One Million Dollars ($1,000,000) in excess thereof, by the delivery to the Administrative Agent and the Revolving Credit Banks of a notice of cancellation upon at least three (3) Domestic Business Days’ notice to Administrative Agent and such Revolving Credit Banks, whereupon, all or such portion of the Revolving Commitments shall terminate as to such Revolving Credit Banks, pro rata on the date set forth in such notice of cancellation; provided that after giving effect to any such reduction of the Revolving Commitments the amount of outstanding Revolving Loans, plus the amount of outstanding Money Market Loans, plus the amount of outstanding Swingline Loans, plus the Letter of Credit Usage may not exceed the Revolving Loan Amount (after giving effect to the foregoing reduction in the Revolving Commitments) and, if there are any Revolving Loans then outstanding in an aggregate amount which exceeds the aggregate Revolving Commitments (after giving effect to any such reduction), the Borrower shall prepay to the Administrative Agent, for the account of such Revolving Credit Banks, all or such portion of the Revolving Loans outstanding on such date in accordance with the requirements of Sections 2.11(a) and (b). The Borrower shall be permitted to designate in its notice of cancellation which Revolving Loans, if any, are to be prepaid. A reduction of the Revolving Commitments pursuant to this Section 2.11(f) shall reduce the Revolving Loan Amount but shall not effect a reduction in the Swingline Loan Amount (unless so elected by the Borrower) until the Revolving Loan Amount has been reduced to an amount equal to the Swingline Loan Amount.

(g) The Borrower may at any time and from time to time cancel all or any part of the unused Commitments under the Term Loan Facility in amounts aggregating One Million Dollars ($1,000,000), or an integral multiple of One Million Dollars ($1,000,000) in excess thereof, by the delivery to the Administrative Agent and the Term Loan Banks of a notice of cancellation upon at least three (3) Domestic Business Days’ notice to Administrative Agent and such Term Loan Banks, whereupon, all or such portion of the Term Loan Commitments shall terminate as to such Term Loan Banks, pro rata on the date set forth in such notice of cancellation, and, if there are any Term Loans then outstanding in an aggregate amount which exceeds the aggregate Term Loan Commitments (after giving effect to any such reduction), the Borrower shall prepay to the Administrative Agent, for the account of such Term Loan Banks, all or such portion of the Term Loans outstanding on such date in accordance with the requirements of Sections 2.11(a) and (b). The Borrower shall be permitted to designate in its notice of cancellation which Term Loans, if any, are to be prepaid.

(h) Upon receipt of a notice of prepayment or cancellation or a return of a Letter of Credit pursuant to this Section, the Administrative Agent shall promptly, and in any event within one (1) Domestic Business Day, notify each Revolving Credit Bank of the contents thereof and of such Revolving Credit Bank’s ratable share (if any) of such prepayment or cancellation and such notice shall not thereafter be revocable by the Borrower.

(i) Any amounts so prepaid pursuant to this Section 2.11 with respect to the Revolving Credit Facility only may be reborrowed subject to the other terms of this Agreement. In the event that the Borrower elects to cancel all or any portion of the Revolving Commitments and the Swingline Commitments pursuant to Section 2.11(f) hereof, such cancellation shall be irrevocable and such amounts may not be reborrowed. In the event that the Borrower elects to

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cancel all or any portion of the Term Loan Commitments pursuant to Section 2.11(g) hereof or if any portion of the Term Loan Commitments is deemed cancelled pursuant to Section 2.9(b), such cancellation shall be irrevocable and such amounts may not be reborrowed.

Section 2.12 General Provisions as to Payments .

(a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 3:00 p.m. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.1. The Administrative Agent will distribute to each applicable Bank its ratable share of each such payment received by the Administrative Agent for the account of the applicable Banks on the same day as received by the Administrative Agent if received by the Administrative Agent by 3:00 p.m. (New York City time), or, if received by the Administrative Agent after 3:00 p.m. (New York City time), on the immediately following Domestic Business Day. If the Administrative Agent shall fail to distribute to a Bank its ratable share of a payment on the same day it is received or the immediately following Domestic Business Day, as applicable in accordance with the immediately preceding sentence, the Administrative Agent shall pay to such Bank the interest accrued on such payment at the Federal Funds Rate, commencing on the day the Administrative Agent should have made the payment to such Bank and ending on the day prior to the date payment is actually made. Whenever any payment of principal of, or interest on, the Base Rate Loans or Swingline Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Term Loans then held by each Term Loan Bank. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective Revolving Commitment Percentages of each Revolving Credit Bank. Each payment (including each prepayment) by the Borrower of principal of, and interest on, the Loans and of fees hereunder shall be made without set-off or counterclaim.

(b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate.


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(c) All payments made on the Loans shall be credited, to the extent of the amount thereof, in the following manner, in each case ratably among the parties entitled thereto in accordance with the amounts then due to such party: (a) first, against all costs, expenses and other fees (including reasonable attorneys’ fees) arising under the terms hereof, of which, if no Event of Default shall have occurred and be continuing, the Borrower has received notice pursuant to the terms hereof, (b) second, against the amount of interest accrued and unpaid on the Loans as of the date of such payment, (c) third, against all principal due and owing on the Loans as of the date of such payment, and (d) fourth, to all other amounts constituting any portion of the Obligations.

(d) If any Bank is a Defaulting Lender, then the Administrative Agent may (or at the request of the Borrower, shall), in its discretion and notwithstanding any contrary provision hereof, (i) apply any amounts thereafter received by the Administrative Agent for the account of such Bank for the benefit of the Administrative Agent, the Swingline Lenders or the Fronting Banks to satisfy such Bank’s obligations to it hereunder until such Bank is not a Defaulting Lender, and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Bank hereunder, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative Agent in its discretion.

Section 2.13 Funding Losses . If the Borrower makes any payment of principal with respect to any Euro-Dollar Loan (pursuant to Article II, VI or VIII or otherwise, and specifically including any payments made pursuant to Sections 2.10 or 2.11) on any day other than the last day of the Interest Period applicable thereto, or if the Borrower fails to borrow any Euro-Dollar Loans, after notice has been given to any Bank in accordance with Section 2.4(a), or to prepay any Euro-Dollar Loans, after notice has been given to any Bank in accordance with Section 2.11(b), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing Participant in the related Loan; provided that no Participant shall be entitled to receive more than the Bank, with respect to which such Participant is a Participant, would be entitled to receive under this Section 2.13), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, provided that such Bank shall have delivered to the Borrower a certificate as to the amount of such loss or expense and the calculation thereof, which certificate shall be conclusive in the absence of manifest error.

Section 2.14 Computation of Interest and Fees . Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).

Section 2.15 Method of Electing Interest Rates .

(a) The Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing or as otherwise provided in Section 2.18 with respect to Mandatory Borrowings. Thereafter, the

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Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article VIII), as follows:

(i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans or Loans bearing interest at the Offered Rate as of any Euro-Dollar Business Day;

(ii) if such Loans are Euro-Dollar Loans or Loans bearing interest at the Offered Rate, the Borrower may elect to convert such Loans to Base Rate Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans.

Each such election shall be made by delivering a notice (a “ Notice of Interest Rate Election ”) to the Administrative Agent at least three (3) Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be continued as Base Rate Loans, in which case such notice shall be delivered to the Administrative Agent no later than 2:00 p.m. (New York City time) at least one (1) Domestic Business Day before such continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group, (ii) the portion to which such notice applies, and the remaining portion to which it does not apply, are each $1,000,000 or any larger multiple of $1,000,000, (iii) there shall be no more than fifteen (15) Revolving Borrowings, and no more than six (6) Term Loan Borrowings, comprised of Euro-Dollar Loans outstanding at any time under this Agreement, (iv) no Loan may be continued as, or converted into, a Euro-Dollar Loan when any Event of Default has occurred and is continuing, and (v) no Interest Period shall extend beyond the applicable Maturity Date.
(b) Each Notice of Interest Rate Election shall specify:

(i) the Group of Loans (or portion thereof) to which such notice applies;

(ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above;

(iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of the initial Interest Period applicable thereto; and

(iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period.

Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period.


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(c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Administrative Agent shall notify each Bank on the same day as it receives such Notice of Interest Rate Election of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Administrative Agent for any Group of Euro-Dollar Loans, such Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto.

Section 2.16 Letters of Credit . (a) Subject to the (a) terms contained in this Agreement and the other Loan Documents, including Section 2.1(a) hereof, upon the receipt of a notice in accordance with Section 2.2(b) requesting the issuance of a Letter of Credit, a Fronting Bank shall issue a Letter of Credit or Letters of Credit in such form as is reasonably acceptable to the Borrower in an amount or amounts equal to the amount or amounts requested by the Borrower. Letters of Credit issued and outstanding under the Existing Credit Agreement are Letters of Credit for purposes of this Agreement.

(b) Each Letter of Credit shall be issued in the minimum amount of Five Hundred Thousand Dollars ($500,000).

(c) The Letter of Credit Usage shall be no more than Fifty Million Dollars ($50,000,000) at any one time and the aggregate undrawn amount of all outstanding Letters of Credit issued by a Fronting Bank at such time plus the aggregate amount of all LC Disbursements made by such Fronting Bank that have not yet been reimbursed by or on behalf of the Borrower at such time shall not exceed its Letter of Credit Commitment unless such Fronting Bank has consented to issue Letters of Credit in excess of its Letter of Credit Commitment.

(d) Notwithstanding anything herein to the contrary, no Fronting Bank shall have any obligation hereunder to issue any Letter of Credit the proceeds of which would be made to any Person which to the knowledge of such Fronting Bank is a Sanctioned Person.

(e) In the event of any request for a drawing under any Letter of Credit by the beneficiary thereunder, the applicable Fronting Bank(s) shall endeavor to notify the Borrower and the Administrative Agent (and the Administrative Agent shall endeavor to notify each Revolving Credit Bank thereof) on or before the date on which such Fronting Bank(s) intend to honor such drawing, and, except as provided in this subsection (e), the Borrower shall reimburse such Fronting Bank(s), by paying to the Administrative Agent in immediately available funds, on the same day on which such drawing is honored in an amount equal to the amount of such drawing. Notwithstanding anything contained herein to the contrary, however, unless the Borrower shall have notified the Administrative Agent and the Fronting Banks prior to 2:00 p.m. (New York time) on the Domestic Business Day immediately prior to the date of such drawing that the Borrower intends to reimburse the Fronting Banks for the amount of such drawing with funds other than the proceeds of the Revolving Loans, the Borrower shall be deemed to have timely given a Notice of Committed Borrowing pursuant to Section 2.2 to the Administrative Agent, requesting a Borrowing of Base Rate Revolving Loans on the date on which such drawing is honored and in an amount equal to the amount of such drawing. Each Revolving Credit Bank (other than the Fronting Banks) shall, in accordance with Section 2.4(b), make available its share of such Borrowing to the Administrative Agent, the proceeds of which shall be

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applied directly by the Administrative Agent to reimburse the Fronting Banks for the amount of such draw. In the event that any such Revolving Credit Bank fails to make available to the Fronting Banks the amount of such Revolving Credit Bank’s participation on the date of a drawing, the Fronting Banks (through the Administrative Agent) shall be entitled to recover such amount on demand from such Revolving Credit Bank together with interest at the Federal Funds Rate commencing on the date such drawing is honored.

(f) If, at the time a beneficiary under any Letter of Credit requests a drawing thereunder, an Event of Default as described in Section 6.1(f) or Section 6.1(g) shall have occurred and is continuing, then on the date on which a Fronting Bank shall have honored such drawing, the Borrower shall have an unreimbursed obligation (the “ Unreimbursed Obligation ”) to such Fronting Bank in an amount equal to the amount of such drawing, which amount shall bear interest at the annual rate of the sum of the Base Rate plus two percent (2%). Each Revolving Credit Bank shall purchase an undivided participating interest in the Unreimbursed Obligation in an amount equal to its Revolving Commitment Percentage thereof, and upon receipt thereof the Administrative Agent shall deliver to such Revolving Credit Bank an Unreimbursed Obligation participation certificate dated the date of the applicable Fronting Bank’s receipt of such funds and in the amount of such Revolving Credit Bank’s Revolving Commitment Percentage thereof.

(g) If, after the date hereof, any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against letters of credit issued by, or assets held by, or deposits in or for the account of, or participations in any letter of credit, upon any Revolving Credit Bank (including any Fronting Bank) or (ii) impose on any Revolving Credit Bank any other condition regarding this Agreement or such Revolving Credit Bank (including any Fronting Bank) as it pertains to the Letters of Credit or any participation therein and the result of any event referred to in the preceding clause (i) or (ii) shall be to increase, by an amount deemed by such Fronting Bank or such Revolving Credit Bank to be material, the cost to such Fronting Bank or any Revolving Credit Bank of issuing or maintaining any Letter of Credit or participating therein then the Borrower shall pay to such Fronting Bank or such Revolving Credit Bank, within 15 days after written demand by such Revolving Credit Bank (with a copy to the Administrative Agent), which demand shall be accompanied by a certificate showing, in reasonable detail, the calculation of such amount or amounts, such additional amounts as shall be required to compensate such Fronting Bank or such Revolving Credit Bank for such increased costs or reduction in amounts received or receivable hereunder.

(h) The Borrower hereby agrees to protect, indemnify, pay and save each Fronting Bank harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys’ fees and disbursements) which any Fronting Bank may incur or be subject to as a result of (i) the issuance of the Letters of Credit, other than as a result of the gross negligence or willful misconduct of such Fronting Bank or (ii) the failure of a Fronting Bank to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority (collectively, “ Governmental Acts ”), other than as a result of the gross negligence or willful misconduct of such Fronting Bank. As between the

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Borrower and a Fronting Bank, the Borrower assumes all risks of the acts and omissions of, or misuses of, the Letters of Credit issued by such Fronting Bank, by the beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, no Fronting Bank shall be responsible (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of such Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or insufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any such Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any message, by mail, cable, telegraph, telex, facsimile transmission, or otherwise; (v) for errors in interpretation of any technical terms; (vi) for any loss or delay in the transmission or otherwise of any documents required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of any such Letter of Credit of the proceeds of such Letter of Credit; and (viii) for any consequence arising from causes beyond the control of such Fronting Bank, including any Government Acts, in each case other than as a result of the gross negligence or willful misconduct of such Fronting Bank. None of the above shall affect, impair or prevent the vesting of any Fronting Bank’s rights and powers hereunder. In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by a Fronting Bank under or in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith, shall not put such Fronting Bank under any resulting liability to the Borrower.

(i) If a Fronting Bank or the Administrative Agent is required at any time, pursuant to any bankruptcy, insolvency, liquidation or reorganization law or otherwise, to return to the Borrower any reimbursement by the Borrower of any drawing under any Letter of Credit, each Revolving Credit Bank shall pay to such Fronting Bank (through the Administrative Agent) or the Administrative Agent, as the case may be, its share of such payment, but without interest thereon unless such Fronting Bank or the Administrative Agent is required to pay interest on such amounts to the person recovering such payment, in which case with interest thereon, computed at the same rate, and on the same basis, as the interest that such Fronting Bank or the Administrative Agent is required to pay.

(j) A Fronting Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Fronting Bank and the successor Fronting Bank; provided that if the successor Fronting Bank is not an Eligible Assignee, then the consent of the Required Banks shall also be required for such replacement. The Administrative Agent shall notify the Lenders of any such replacement of a Fronting Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Fronting Bank pursuant to Section 2.8. From and after the effective date of any such replacement, (i) the successor Fronting Bank shall have all the rights and obligations of the Fronting Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Fronting Bank” shall be deemed to refer to such successor or to any previous Fronting Bank, or to such successor and all previous Fronting Banks, as the context shall require. After the replacement of a Fronting Bank hereunder, the

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replaced Fronting Bank shall remain a party hereto and shall continue to have all the rights and obligations of a Fronting Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. Subject to and conditioned on the appointment and acceptance of a successor Fronting Bank, any Fronting Bank may resign as a Fronting Bank at any time upon thirty days’ prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, such Fronting Bank shall be replaced as set forth above.

Section 2.17 Letter of Credit Usage Absolute . The obligations of the Borrower under this Agreement in respect of any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement (as the same may be amended from time to time) and any Letter of Credit Documents (as hereinafter defined) under all circumstances, including, without limitation, to the extent permitted by law, the following circumstances:

(a) any lack of validity or enforceability of any Letter of Credit or any other agreement or instrument relating thereto (collectively, the “ Letter of Credit Documents ”) or any Loan Document;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Borrower in respect of the Letters of Credit or any other amendment or waiver of or any consent by the Borrower to departure from all or any of the Letter of Credit Documents or any Loan Document; provided , that no Fronting Bank shall consent to any such change or amendment unless previously consented to in writing by the Borrower;

(c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the obligations of the Borrower in respect of the Letters of Credit;

(d) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Administrative Agent, any Fronting Bank or any Revolving Credit Bank (other than a defense based on the gross negligence or willful misconduct of the Administrative Agent, such Fronting Bank or such Revolving Credit Bank) or any other Person, whether in connection with the Loan Documents, the transactions contemplated hereby or by the Letters of Credit Documents or any unrelated transaction;

(e) any draft or any other document presented under or in connection with any Letter of Credit or other Loan Document proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; provided , that payment by a Fronting Bank under such Letter of Credit against presentation of such draft or document shall not have constituted gross negligence or willful misconduct of such Fronting Bank;



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(f) payment by a Fronting Bank against presentation of a draft or certificate that does not comply with the terms of the Letter of Credit; provided , that such payment shall not have constituted gross negligence or willful misconduct of such Fronting Bank; and

(g) any other circumstance or happening whatsoever other than the payment in full of all obligations hereunder in respect of any Letter of Credit or any agreement or instrument relating to any Letter of Credit, whether or not similar to any of the foregoing, that might otherwise constitute a defense available to, or a discharge of, the Borrower; provided , that such other circumstance or happening shall not have been the result of gross negligence or willful misconduct of the applicable Fronting Bank.
Section 2.18 Swingline Loan Subfacility .

(a) Swingline Commitment . Subject to the terms and conditions of this Section 2.18, each Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans to the Borrower (each a “ Swingline Loan ” and, collectively, the “ Swingline Loans ”) from time to time during the Availability Period hereof; provided, however, that the aggregate amount of Swingline Loans outstanding at any time shall not exceed the lesser of (i) the aggregate Revolving Commitments less the Outstanding Balance, and (ii) the Swingline Loan Amount; and provided further that (i) the aggregate principal amount of outstanding Swingline Loans made by such Swingline Lender shall not exceed such Swingline Lender’s Swingline Commitment unless such Swingline Lender has consented to make Swingline Loans in excess of its Swingline Commitment. A Swingline Lender shall not make a Swingline Loan to refinance an outstanding Swingline Loan. Subject to the limitations set forth herein, any amounts repaid in respect of Swingline Loans may be reborrowed.

(b) Swingline Borrowings .

(i) Notice of Borrowing . With respect to any Swingline Borrowing, the Borrower shall give the Swingline Lenders and the Administrative Agent notice in writing which is received by the Swingline Lenders and Administrative Agent not later than 2:00 p.m. (New York City time) on the proposed date of such Swingline Borrowing (and confirmed by telephone by such time), specifying (A) that a Swingline Borrowing is being requested, (B) the amount of such Swingline Borrowing, (C) the proposed date of such Swingline Borrowing, which shall be a Domestic Business Day, and (D) that no Default or Event of Default has occurred and is continuing both before and after giving effect to such Swingline Borrowing. Such notice shall be irrevocable. Each Swingline Lender shall make its ratable portion of the requested Swingline Loan (such ratable portion to be calculated based upon such Swingline Lender’s Swingline Commitment to the Swingline Loan Amount) available to the Borrower by means of a credit to the general deposit account of the Borrower with the Administrative Agent designated for such purpose) by 6:00 p.m. (New York City time) on the requested date of such Swingline Loan. The failure of any Swingline Lender to make its ratable portion of a Swingline Loan shall not relieve any other Swingline Lender of its obligation hereunder to make its ratable portion of such Swingline Loan on the date of such Swingline Loan, but no Swingline Lender shall be responsible for the failure of any other Swingline

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Lender to make the ratable portion of a Swingline Loan to be made by such other Swingline Lender on the date of any Swingline Loan.

(ii) Minimum Amounts . Each Swingline Borrowing shall be in a minimum principal amount of $1,000,000, or larger multiples of $1,000,000 in excess thereof.

(iii) Repayment of Swingline Loans . Each Swingline Loan shall be due and payable on the earliest of (A) ten (10) days after the date of the applicable Swingline Borrowing, (B) the date of the next Committed Revolving Borrowing, and (C) the Revolving Credit Maturity Date. If, and to the extent, any Swingline Loans shall be outstanding on the date of any Committed Revolving Borrowing, such Swingline Loans shall first be repaid from the proceeds of such Committed Revolving Borrowing prior to the disbursement of the same to the Borrower. If, and to the extent, a Committed Revolving Borrowing is not requested prior to the Revolving Credit Maturity Date or the end of the five (5) day period after a Swingline Borrowing, or unless the Borrower shall have notified the Administrative Agent and the Swingline Lenders prior to 1:00 P.M. (New York City time) on the fourth (4th) day after the Swingline Borrowing that the Borrower intends to reimburse such Swingline Lenders for the amount of such Swingline Borrowing with funds other than proceeds of the Revolving Loans, the Borrower shall be deemed to have requested a Committed Revolving Borrowing comprised entirely of Base Rate Loans in the amount of the applicable Swingline Loan then outstanding, the proceeds of which shall be used to repay such Swingline Loans to such Swingline Lenders. In addition, if (x) the Borrower does not repay the Swingline Loans on or prior to the end of such five (5) day period, or (y) a Default or Event of Default shall have occurred during such five (5) day period, each Swingline Lender may, at any time, in its sole discretion, by written notice to the Borrower and the Administrative Agent, demand repayment of its Swingline Loans by way of a Committed Revolving Borrowing, in which case the Borrower shall be deemed to have requested a Committed Revolving Borrowing comprised entirely of Base Rate Loans in the amount of such Swingline Loans then outstanding, the proceeds of which shall be used to repay such Swingline Loans to such Swingline Lender. Any Committed Revolving Borrowing which is deemed requested by the Borrower in accordance with this Section 2.18(b)(iii) is hereinafter referred to as a “ Mandatory Borrowing ”. Each Revolving Credit Bank hereby irrevocably agrees to make Committed Revolving Loans promptly upon receipt of notice from a Swingline Lender of any such deemed request for a Mandatory Borrowing in the amount and in the manner specified in the preceding sentences and on the date such notice is received by such Revolving Credit Bank (or the next Domestic Business Day if such notice is received after 12:00 noon (New York City time)) notwithstanding (I) that the amount of the Mandatory Borrowing may not comply with the minimum amount of Committed Revolving Borrowings otherwise required hereunder, (II) whether any conditions specified in Section 3.2 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such deemed request for a Committed Revolving Borrowing to be made by the time otherwise required in Section 2.2, (V) the date of such Mandatory Borrowing (provided that such date must be a Domestic Business Day), or (VI) any termination of the Revolving Commitments immediately prior to such Mandatory Borrowing or contemporaneously therewith; provided, however, that no

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Revolving Credit Bank shall be obligated to make Committed Revolving Loans in respect of a Mandatory Borrowing if a Default or an Event of Default then exists and the applicable Swingline Loan was made by a Swingline Lender without receipt of a written Notice of Borrowing in the form specified in subclause (i) above or after Administrative Agent has delivered a notice of Default or Event of Default which has not been rescinded.

(iv) Purchase of Participations . In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each Revolving Credit Bank hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payment received from the Borrower on or after such date and prior to such purchase) from the Swingline Lenders such participations in the outstanding Swingline Loans as shall be necessary to cause each such Revolving Credit Bank to share in such Swingline Loans ratably based upon its Revolving Commitment Percentage (determined before giving effect to any termination of the Revolving Commitments pursuant to Section 6.2), provided that (A) all interest payable on the Swingline Loans with respect to any participation shall be for the account of the applicable Swingline Lender until but excluding the day upon which the Mandatory Borrowing would otherwise have occurred, and (B) in the event of a delay between the day upon which the Mandatory Borrowing would otherwise have occurred and the time any purchase of a participation pursuant to this sentence is actually made, the purchasing Revolving Credit Bank shall be required to pay to the Swingline Lenders interest on the principal amount of such participation for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate equal to the Federal Funds Rate, for the two (2) Domestic Business Days after the date the Mandatory Borrowing would otherwise have occurred, and thereafter at a rate equal to the Base Rate. Notwithstanding the foregoing, no Revolving Credit Bank shall be obligated to purchase a participation in any Swingline Loan if a Default or an Event of Default then exists and such Swingline Loan was made by a Swingline Lender without receipt of a written Notice of Borrowing in the form specified in subclause (i) above or after Administrative Agent has delivered a notice of Default or Event of Default which has not been rescinded.

(c) Interest Rate . Each Swingline Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Swingline Loan is made until the date it is repaid, at a rate per annum equal to the Federal Funds Rate plus the Applicable Margin for Euro-Dollar Revolving Loans for such day.

(d) Replacement and Resignation . (i) Any Swingline Lender may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Swingline Lender and the successor Swingline Lender. The Administrative Agent shall notify the Lenders of any such replacement of a Swingline Lender. At the time any such replacement shall become effective, the Borrower shall pay all unpaid interest accrued for the account of the replaced Swingline Lender pursuant to Section 2.7. From and after the effective date of any such replacement, (x) the successor Swingline Lender shall have all the rights and obligations of the replaced Swingline Lender under this Agreement with respect to Swingline Loans made

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thereafter and (y) references herein to the term “Swingline Lender” shall be deemed to refer to such successor or to any previous Swingline Lender, or to such successor and all previous Swingline Lenders, as the context shall require. After the replacement of a Swingline Lender hereunder, the replaced Swingline Lender shall remain a party hereto and shall continue to have all the rights and obligations of a Swingline Lender under this Agreement with respect to Swingline Loans made by it prior to its replacement, but shall not be required to make additional Swingline Loans. Subject to and conditioned on the appointment and acceptance of a successor Swingline Lender, any Swingline Lender may resign as a Swingline Lender at any time upon thirty days’ prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, such Swingline Lender shall be replaced in accordance with the replacement provisions of this Section 2.18(d).

Section 2.19 Extending Facilities .

(a) The Borrower may at any time and from time to time request that all or any portion of Term Loans or Revolving Loans or the Revolving Commitment with a like maturity date (an “ Existing Loan Facility ”) be converted to extend the scheduled maturity date(s) with respect to all or a portion of any principal amount of such Term Loans, Revolving Loans or Revolving Commitments, as applicable, and to otherwise modify the terms of such Term Loans, Revolving Loans or Revolving Commitments to the extent not prohibited in this Section 2.19 (any such Term Loans or Revolving Loans which have been so converted, “ Extended Loans ”, and any such Revolving Commitments which have been so converted, “ Extended Revolving Commitments ”) and to provide for other terms consistent with this Section 2.19 (an “ Extension ”). Any such request shall be made on a pro rata basis and on the same terms to each applicable Bank. In order to establish any Extended Loans or Extended Revolving Commitments, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Banks under the applicable Existing Loan Facility) (an “ Extension Request ”) setting forth the proposed terms of the Extended Loans or Extended Revolving Commitments to be established, provided that:

(i) all or any of the scheduled amortization payments of principal of the Extended Loans (including the maturity date) may be delayed to later dates than the scheduled amortization payments of principal (including the maturity date) of the Term Loans or Revolving Loans, as applicable, of such Existing Loan Facility to the extent provided in the applicable Loan Extension Amendment;

(ii) the interest margins with respect to the Extended Loans or Extended Revolving Commitments may be different than the interest margins for the Term Loans, Revolving Loans or Revolving Commitments, as applicable, of such Existing Loan Facility, and upfront fees may be paid to the Extending Lenders, in each case, to the extent provided in the applicable Loan Extension Amendment;

(iii) the Loan Extension Amendment may provide for other covenants and terms that apply solely to any period after the latest applicable Maturity Date of the Term Loans, Revolving Loans and Revolving Loan Commitments being converted as in effect on the effective date of the Loan Extension Amendment immediately prior to the establishment of such Extended Loans or Extended Revolving Commitments; or


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(iv) no Extended Loans that were Term Loans may be optionally prepaid prior to the date on which the Term Loans under the Existing Loan Facility from which they were converted are repaid in full unless such optional prepayment is accompanied by a pro rata optional prepayment of the Term Loans under such Existing Loan Facility; and

(v) (A) the borrowing and repayment (except for (x) payments of interest and fees at different rates on Extended Revolving Commitments (and related outstandings), (y) repayments required upon the maturity date of the non-extending Revolving Commitments and (z) repayment made in connection with a permanent repayment and termination of commitments) of Loans with respect to Extended Revolving Commitments after the applicable Extension date shall be made on a pro rata basis with all other Revolving Commitments of such tranche, (B) all Swingline Loans and Letters of Credit shall be participated on a pro rata basis by all Banks with Revolving Commitments in accordance with their percentage of the Revolving Commitments subject to the express terms herein, (C) the permanent repayment of Revolving Loans with respect to, and termination of, Extended Revolving Commitments after the applicable Extension date shall be made on a pro rata basis with all other Revolving Commitments, except that the Borrower shall be permitted to permanently repay and terminate commitments of any such Class on a better than a pro rata basis as compared to any other Class with a later maturity date than such Class, (D) assignments and participations of Extended Revolving Commitments and extended Revolving Loans shall be governed by the same assignment and participation provisions applicable to Revolving Commitments and Revolving Loans and (E) at no time shall there be Revolving Commitments hereunder (including Extended Revolving Commitments and any original Revolving Commitments) which have more than two (2) different maturity dates.

Any Extended Loans and/or Extended Revolving Commitments converted pursuant to any Loan Extension Amendment shall be designated a separate Class of Extended Loans or Extended Revolving Commitments, as the case may be, for all purposes of this Agreement; provided that any Extended Loans converted from an Existing Loan Facility may, to the extent provided in the applicable Loan Extension Amendment, be designated as an increase in any previously established Class of Loans or Commitments with respect to such Existing Loan Facility. Any Extended Term Loans shall constitute a separate Class of Term Loans from the Class of Term Loans from which there were converted, any Extended Revolving Loans shall constitute a separate Class of Revolving Loans from the Class of Revolving Loans from which there were converted and any Extended Revolving Commitments shall constitute a separate tranche of Revolving Commitments from the tranche of Revolving Commitments from which they were converted. No Extension shall constitute a voluntary or mandatory prepayment for purpose of Sections 2.10 and 2.11 . Each Extension shall become effective only with respect to the Loans and Commitments of the Banks that accept an Extension Request.

(b) The Borrower shall provide the applicable Extension Request at least ten (10) Business Days prior to the date on which Banks under the Existing Loan Facility are requested to respond. No Extension Request is required to be in any minimum amount or increment; provided that the Borrower may specify as a condition to consummating any such Extension that a minimum amount (to be specified in the applicable Extension Request) of Term

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Loans, Revolving Loans or Revolving Commitments be tendered (subject to waiver by the Borrower in its sole discretion). No Bank shall have any obligation to agree to have any of its Term Loans, Revolving Loans or Revolving Commitments, as applicable, of any Existing Loan Facility converted into Extended Loans or Extended Revolving Commitments pursuant to any Extension Request. Any Bank (an “ Extending Lender ”) wishing in its sole and individual discretion to have all or any portion of its Term Loans, Revolving Loans or Revolving Commitments, as applicable, under the Existing Loan Facility subject to such Extension Request converted into Extended Loans or Extended Revolving Commitments shall notify the Administrative Agent (an “ Extension Election ”) on or prior to the date specified in such Extension Request of the amount of its Term Loans, Revolving Loans or Revolving Commitments, as applicable, under the Existing Loan Facility which it has elected to request be converted into Extended Loans or Extended Revolving Commitments. In the event that the aggregate amount of Term Loans, Revolving Loans and Revolving Commitments under the Existing Loan Facility subject to Extension Elections exceeds the amount of Extended Loans or Extended Revolving Commitments requested pursuant to the Extension Request, Term Loans, Revolving Loans and Revolving Commitments subject to Extension Elections shall be converted to Extended Loans or Extended Revolving Commitments on a pro rata basis based on the amount of Term Loans, Revolving Loans and Revolving Commitments, as applicable, included in such Extension Election. It shall be a condition precedent to the effectiveness of any Extension that no Default or Event of Default shall exist on the date of the Extension Request and on the date of the Extension.

(c) Each Class of Extended Loans and Extended Revolving Commitments shall be established pursuant to an amendment (a “ Loan Extension Amendment ”) to this Agreement among the Borrower, the Administrative Agent and each Extending Lender providing an Extended Loan or Extended Revolving Commitment thereunder which shall be consistent with the provisions set forth in paragraph (a) above (but which shall not require the consent of any other Bank) and which may include such technical amendments to this Agreement as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower. Each Loan Extension Amendment shall be binding on the Banks, the General Partner and the other parties hereto. In connection with any Loan Extension Amendment, the Borrower shall deliver a reaffirmation of the Guaranty from the General Partner and such resolutions, certificates, opinions of counsel (including in-house opinions in lieu of opinions of outside counsel) and other documents in connection therewith as may be reasonably requested by the Administrative Agent.

(d) This Section 2.19 shall supersede any provisions in Sections 9.4 or 9.5 to the contrary.

ARTICLE III

CONDITIONS

Section 3.1 Closing . The closing hereunder shall occur on the date (the “ Closing Date ”) when each of the following conditions is satisfied (or waived by the Administrative Agent and the Required Banks, such waiver to be evidenced by the continuation or funding after the date hereof of Loans and notice of such waiver to be given to the Banks by

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the Administrative Agent), each document to be dated the Closing Date unless otherwise indicated:

(a) the Borrower shall have executed and delivered to the Administrative Agent Notes for the account of each Bank that shall have requested the same, dated on or before the Closing Date complying with the provisions of Section 2.5;

(b) the Borrower shall have executed and delivered to the Administrative Agent a duly executed original of this Agreement;

(c) the General Partner shall have executed and delivered to the Administrative Agent a duly executed original of the Guaranty;

(d) the Administrative Agent shall have received an opinion of Latham & Watkins LLP, counsel for the Borrower and the General Partner, reasonably acceptable to the Administrative Agent, the Banks and their counsel;

(e) the Administrative Agent shall have received all documents the Administrative Agent may reasonably request relating to the existence of the Borrower, the General Partner, the authority for and the validity of this Agreement and the other Loan Documents, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Administrative Agent. Such documentation shall include, without limitation, the articles of incorporation and by-laws or the partnership agreement and limited partnership certificate, as applicable, of the Borrower and the General Partner, as amended, modified or supplemented to the Closing Date, each certified to be true, correct and complete by a senior officer of the Borrower or the General Partner, as the case may be, as of the Closing Date, together with a good standing certificate from the Secretary of State (or the equivalent thereof) of the State of Delaware with respect to the Borrower and of the State of Maryland with respect to the General Partner, and a good standing certificate from the Secretary of State (or the equivalent thereof) of each other State in which the Borrower and the General Partner is required to be qualified to transact business, each to be dated not more than forty-five (45) days prior to the Closing Date;

(f) the Administrative Agent shall have received all certificates, agreements and other documents and papers referred to in this Section 3.1 and Section 3.2, unless otherwise specified, in sufficient counterparts, reasonably satisfactory in form and substance to the Administrative Agent in its sole discretion;

(g) the Borrower and the General Partner shall have taken all actions required to authorize the execution and delivery of this Agreement and the other Loan Documents and the performance thereof by the Borrower and the General Partner;

(h) the Administrative Agent and the Banks shall have received an unaudited consolidated balance sheet and income statement of the Borrower for the fiscal quarter ended March 31, 2017;


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(i) the Administrative Agent shall be satisfied that neither the Borrower nor the General Partner is subject to any present or contingent environmental liability which could reasonably be expected to have a Material Adverse Effect;

(j) the Administrative Agent shall have received wire transfer instructions in connection with the Loans to be made on the Closing Date;

(k) the Administrative Agent shall have received, for its and any other Bank’s account, all fees due and payable pursuant to this Agreement, and the reasonable fees and expenses accrued through the Closing Date of Morgan, Lewis & Bockius LLP;

(l) the Administrative Agent shall have received copies of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by the Borrower, and the validity and enforceability against the Borrower, of the Loan Documents, or in connection with any of the transactions contemplated thereby to occur on or prior to the Closing Date, and such consents, licenses and approvals shall be in full force and effect;

(m) the representations and warranties of the Borrower contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date both before and after giving effect to the making of any Loans;

(n) receipt by the Administrative Agent and the Banks of a certificate of the chief financial officer, treasurer or the chief accounting officer of the Borrower certifying that the Borrower is in compliance with all covenants of the Borrower contained in this Agreement, including, without limitation, the requirements of Section 5.8, as of the Closing Date;

(o) the General Partner shall intend to continue to qualify as a real estate investment trust under Section 856 of the Internal Revenue Code (a “ REIT ”); and

(p)    the Borrower shall have (i) applied the proceeds of the Loans and other amounts on the date hereof to repay all outstanding “Term Loans” under the Existing Credit Agreement and the Existing Term Loan Agreement, and (ii) thereafter the Existing Term Loan Agreement shall be terminated.

The Administrative Agent shall promptly notify the Borrower and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto.
Section 3.2 Borrowings . The obligation of any Bank to make a Loan on the occasion of any Borrowing or to participate in any Letter of Credit issued by a Fronting Bank and the obligation of any Fronting Bank to issue a Letter of Credit or the obligation of a Swingline Lender to make any Swingline Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions:

(a) the Closing Date shall have occurred on or prior to July 31, 2017;

(b) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.2 or 2.3;



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(c) immediately after such Borrowing, (i) the Outstanding Balance for the Revolving Credit Facility will not exceed the aggregate amount of the Revolving Commitments, (ii) the aggregate outstanding and unpaid principal balance of all Term Loans made on the Closing Date will not exceed the Term Loan Amount, (iii) with respect to each Revolving Credit Bank, such Revolving Credit Bank’s pro rata portion of the Committed Revolving Loans and Letter of Credit Usage will not exceed such Revolving Credit Bank’s Revolving Commitment, as applicable and (iv) with respect to each Term Loan Bank, such Term Loan Bank’s pro rata portion of the Term Loans will not exceed such Term Loan Bank’s Term Loan Commitment;

(d) immediately before and after such Borrowing, no Default or Event of Default shall have occurred and be continuing both before and after giving effect to the making of such Loans;

(e) the representations and warranties of the Borrower contained in this Agreement (other than representations and warranties which speak as of a specific date) shall be true and correct in all material respects on and as of the date of such Borrowing both before and after giving effect to the making of such Loans;

(f) no law or regulation shall have been adopted, no order, judgment or decree of any governmental authority shall have been issued, and no litigation shall be pending or threatened, which does or, with respect to any threatened litigation, seeks to enjoin, prohibit or restrain, the making or repayment of the Loans, the issuance of any Letter of Credit or any participations therein or the consummation of the transactions contemplated hereby; and

(g) no event, act or condition shall have occurred after the Closing Date which, in the reasonable judgment of the Administrative Agent or the Required Banks, as the case may be, has had or is likely to have a Material Adverse Effect.

Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c) through (f) of this Section (except that with respect to clause (f), such representation and warranty shall be deemed to be limited to laws, regulations, orders, judgments, decrees and litigation affecting the Borrower and not solely the Banks).
ARTICLE IV

REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and each of the other Banks which may become a party to this Agreement to make the Loans and to induce the Fronting Banks to issue the Letters of Credit, the Borrower makes the following representations and warranties. Such representations and warranties shall survive the effectiveness of this Agreement, the execution and delivery of the other Loan Documents and the making of the Loans.
Section 4.1 Existence and Power . The Borrower is duly organized, validly existing and in good standing as a limited partnership under the laws of the State of Delaware and has all powers and all material governmental licenses, authorizations, consents and approvals required to own its property and assets and carry on its business as now conducted or as it

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presently proposes to conduct and has been duly qualified and is in good standing in every jurisdiction in which the failure to be so qualified and/or in good standing is likely to have a Material Adverse Effect.

Section 4.2 Power and Authority . The Borrower has the organizational power and authority to execute, deliver and carry out the terms and provisions of each of the Loan Documents to which it is a party and has taken all necessary action to authorize the execution and delivery on behalf of the Borrower and the performance by the Borrower of such Loan Documents. The Borrower has duly executed and delivered each Loan Document to which it is a party, and each such Loan Document constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, except as enforceability may be limited by applicable insolvency, bankruptcy or other laws affecting creditors’ rights generally, or general principles of equity, whether such enforceability is considered in a proceeding in equity or at law.

Section 4.3 No Violation . Neither the execution, delivery or performance by or on behalf of the Borrower of the Loan Documents, nor compliance by the Borrower with the terms and provisions thereof nor the consummation of the transactions contemplated by the Loan Documents, (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality applicable to Borrower except to the extent such contravention is not likely to have a Material Adverse Effect, or (ii) will conflict with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Borrower pursuant to the terms of any material indenture, mortgage, deed of trust, or other agreement or other instrument to which the Borrower (or of any partnership of which the Borrower is a partner) is a party or by which it or any of its property or assets is bound or to which it is subject except to the extent such conflict or breach is not likely to have a Material Adverse Effect, or (iii) will conflict with or result in a breach of any organizational document of any Subsidiary, the certificate of limited partnership, partnership agreement or other organizational document of Borrower, or the General Partner’s articles of incorporation or by-laws.

Section 4.4 Financial Information .

(a) The audited consolidated balance sheets and statements of income of the Borrower and the General Partner as of December 31, 2016 and the unaudited balance sheets and statements of income of the Borrower and the General Partner as of March 31, 2017 fairly present, in conformity with GAAP, the consolidated financial position of the Borrower and the General Partner as of such date and their consolidated results of operations for such fiscal periods.

(b) Since December 31, 2016, except as disclosed in public filings with the Securities and Exchange Commission (i) there has been no material adverse change in the business, financial position or results of operations of the Borrower or the General Partner and (ii) except as previously disclosed to the Administrative Agent and to the Banks, neither the Borrower nor the General Partner has incurred any material indebtedness or guaranty.



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Section 4.5 Litigation .

(a) There is no action, suit or proceeding pending against, or to the knowledge of the Borrower, threatened against or affecting, (i) the Borrower, the General Partner or any of their Subsidiaries, (ii) the Loan Documents or any of the transactions contemplated by the Loan Documents or (iii) any of their assets, in any case before any court or arbitrator or any governmental body, agency or official which could reasonably be expected to have a Material Adverse Effect or which in any manner draws into question the validity of this Agreement or the other Loan Documents.

(b) There are no final nonappealable judgments or decrees in an aggregate amount of One Million Dollars ($1,000,000) or more entered by a court or courts of competent jurisdiction against the Borrower or the General Partner (other than any judgment as to which, and only to the extent, a reputable insurance company has acknowledged coverage of such claim in writing).

Section 4.6 Compliance with ERISA .

(a) Except as previously disclosed to the Administrative Agent in writing as of the Closing Date, each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.

(b) Except for each “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) that is maintained, participated in or contributed to, by one or more members of the ERISA Group, no member of the ERISA Group is a “party in interest” (as such term is defined in Section 3(14) of ERISA or a “disqualified person” (as such term is defined in Section 4975(e)(2) of the Internal Revenue Code) with respect to any funded employee benefit plan and none of the assets of any such plans have been invested in a manner that would cause the transactions contemplated by the Loan Documents to constitute a nonexempt prohibited transaction (as such term is defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA).

(c) Neither the Borrower nor the General Partner is (a) an employee benefit plan subject to Title I of ERISA, (b) a plan or account subject to Section 4975 of the Internal Revenue Code, (c) an entity deemed under Department of Labor Regulation Section 2510.3-101 to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code, or (d) a “governmental plan” within the meaning of Section 3(32) of ERISA.


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Section 4.7 Environmental Compliance . To the best of Borrower’s knowledge, except as set forth in the Phase I environmental report(s) delivered to and accepted by the Administrative Agent with respect to each of the Unencumbered Asset Pool Properties (as supplemented or amended, the “ Environmental Reports ”), (i) there are in effect all Environmental Approvals which are required to be obtained under all Environmental Laws with respect to such Property, except for such Environmental Approvals the absence of which would not have a Material Adverse Effect, (ii) the Borrower is in compliance in all material respects with the terms and conditions of all such Environmental Approvals, and is also in compliance in all material respects with all other Environmental Laws or any plan, order, decree, judgment, injunction, notice or demand letter issued, entered or approved thereunder, except to the extent failure to comply would not have a Material Adverse Effect.

Except as set forth in the Environmental Reports or otherwise disclosed in writing to the Administrative Agent as of the Closing Date or with respect to a New Acquisition, as of the date of such New Acquisition, to Borrower’s actual knowledge:
(i) There are no Environmental Claims or investigations pending or threatened by any Governmental Authority with respect to any alleged failure by the Borrower to have any Environmental Approval required in connection with the conduct of the business of the Borrower on any of the Unencumbered Asset Pool Properties, or with respect to any generation, treatment, storage, recycling, transportation, Release or disposal of any Material of Environmental Concern generated by the Borrower or any lessee on any of the Unencumbered Asset Pool Properties;

(ii) No Material of Environmental Concern has been Released at the Property to an extent that it may reasonably be expected to have a Material Adverse Effect;

(iii) No PCB (in amounts or concentrations which exceed those set by applicable Environmental Laws) is present at any of the Unencumbered Asset Pool Properties;

(iv) No friable asbestos is present at any of the Unencumbered Asset Pool Properties;

(v) There are no underground storage tanks for Material of Environmental Concern, active or abandoned, at any of the Unencumbered Asset Pool Properties;

(vi) No Environmental Claims have been filed with a Governmental Authority with respect to any of the Unencumbered Asset Pool Properties, and none of the Unencumbered Asset Pool Properties is listed or proposed for listing on the National Priority List promulgated pursuant to CERCLA, on CERCLIS or on any similar state list of sites requiring investigation or clean-up;

(vii) There are no Liens arising under or pursuant to any Environmental Laws on any of the Unencumbered Asset Pool Properties, and no government actions

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have been taken or are in process which could subject any of the Unencumbered Asset Pool Properties to such Liens; and

(viii) There have been no environmental investigations, studies, audits, tests, reviews or other analyses conducted by, or which are in the possession of, the Borrower in relation to any of the Unencumbered Asset Pool Properties which have not been made available to the Administrative Agent.

Section 4.8 Taxes . The federal income tax returns of the Borrower and its Consolidated Subsidiaries for the fiscal year ended December 31, 2016 have been filed. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary except those being contested in good faith. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate.

Section 4.9 Full Disclosure . All information heretofore furnished by the Borrower to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is true and accurate in all material respects on the date as of which such information is stated or certified. The Borrower has disclosed to the Banks in writing any and all facts known to the Borrower which materially and adversely affect or are likely to materially and adversely affect (to the extent the Borrower can now reasonably foresee), the business, operations or financial condition of the Borrower considered as one enterprise or the ability of the Borrower to perform its obligations under this Agreement or the other Loan Documents.

Section 4.10 Solvency . On the Closing Date and after giving effect to the transactions contemplated by the Loan Documents occurring on the Closing Date, the Borrower is Solvent.

Section 4.11 Use of Proceeds; Margin Regulations . All proceeds of the Loans will be used by the Borrower only in accordance with the provisions hereof. No part of the proceeds of any Loan will be used by the Borrower to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulations T, U or X of the Federal Reserve Board.

Section 4.12 Governmental Approvals . No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of any Loan Document or the consummation of any of the transactions contemplated thereby other than those that have already been duly made or obtained and remain in full force and effect.

Section 4.13 Investment Company Act . The Borrower is not (x) an “investment company” or a company “controlled” by an “investment company”, within the meaning of the

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Investment Company Act of 1940, as amended or (y) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

Section 4.14 Closing Date Transactions . On the Closing Date and immediately prior to or concurrently with the making of the Loans, the transactions (other than the making of the Loans) intended to be consummated on the Closing Date will have been consummated in accordance with all applicable laws. On or prior to the Closing Date, all consents and approvals of, and filings and registrations with, and all other actions by, any Person required in order to make or consummate such transactions have been obtained, given, filed or taken and are in full force and effect.

Section 4.15 Representations and Warranties in Loan Documents . All representations and warranties made by the Borrower in the Loan Documents are true and correct in all material respects.

Section 4.16 Patents, Trademarks, etc . The Borrower has obtained and holds in full force and effect all patents, trademarks, service marks, trade names, copyrights and other such rights, free from burdensome restrictions, which are necessary for the operation of its business as presently conducted, the impairment of which is likely to have a Material Adverse Effect. To the Borrower’s knowledge, no material product, process, method, substance, part or other material presently sold by or employed by the Borrower in connection with such business infringes any patent, trademark, service mark, trade name, copyright, license or other such right owned by any other Person. There is not pending or, to the Borrower’s knowledge, threatened any claim or litigation against or affecting the Borrower contesting its right to sell or use any such product, process, method, substance, part or other material.

Section 4.17 No Default . No Default or Event of Default exists under or with respect to any Loan Document. The Borrower is not in default in any material respect beyond any applicable grace period under or with respect to any other material agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound in any respect, the existence of which default is likely (to the extent that the Borrower can now reasonably foresee) to result in a Material Adverse Effect.

Section 4.18 Licenses, etc . The Borrower has obtained and holds in full force and effect, all franchises, licenses, permits, certificates, authorizations, qualifications, accreditations, easements, rights of way and other consents and approvals which are necessary for the operation of its businesses as presently conducted, the absence of which is likely (to the extent that the Borrower can now reasonably foresee) to have a Material Adverse Effect.

Section 4.19 Compliance With Law . The Borrower is in compliance with all laws, rules, regulations, orders, judgments, writs and decrees, including, without limitation, all building and zoning ordinances and codes, the failure to comply with which is likely (to the extent that the Borrower can now reasonably foresee) to have a Material Adverse Effect.

Section 4.20 No Burdensome Restrictions . The Borrower is not a party to any agreement or instrument or subject to any other obligation or any charter or corporate or

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partnership restriction, as the case may be, which, individually or in the aggregate, is likely (to the extent that the Borrower can now reasonably foresee) to have a Material Adverse Effect.

Section 4.21 Brokers’ Fees . The Borrower has not dealt with any broker or finder with respect to the transactions contemplated by the Loan Documents (except with respect to the acquisition or disposition of Real Property Assets) or otherwise in connection with this Agreement (it being understood that JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated or its Affiliates, Wells Fargo Securities, LLC, PNC Capital Markets LLC and U.S. Bank National Association, have acted as arrangers for the Facilities and the fees and expenses of which shall be paid by Borrower), and the Borrower has not done any acts, had any negotiations or conversation, or made any agreements or promises which will in any way create or give rise to any obligation or liability for the payment by the Borrower of any brokerage fee, charge, commission or other compensation to any party with respect to the transactions contemplated by the Loan Documents (except with respect to the acquisition or disposition of Real Property Assets), other than the fees payable hereunder.

Section 4.22 Labor Matters . Except as set forth on Schedule 4.22 attached hereto and made a part hereof, there are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower and the Borrower has not suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five (5) years.

Section 4.23 Organizational Documents . The documents delivered pursuant to Section 3.1(e) constitute, as of the Closing Date, all of the organizational documents (together with all amendments and modifications thereof) of the Borrower. The Borrower represents that it has delivered to the Administrative Agent true, correct and complete copies of each of the documents set forth in this Section 4.23.

Section 4.24 Principal Offices . The principal office, chief executive office and principal place of business of the Borrower is 12200 West Olympic Boulevard, Suite 200, Los Angeles, California 90064.

Section 4.25 REIT Status . For the fiscal year ended December 31, 2016, the General Partner qualified, and the General Partner intends to continue to qualify, as a REIT.

Section 4.26 Ownership of Property . The Borrower and/or the General Partner, directly or indirectly, owns fee simple title to or a ground leasehold interest in each of the Unencumbered Asset Pool Properties.

Section 4.27 Insurance . The Borrower or its tenants, as applicable, currently maintains insurance at 100% replacement cost insurance coverage in respect of each of the Real Property Assets, as well as comprehensive general liability insurance (including “builders’ risk”) against claims for personal, and bodily injury and/or death, to one or more persons, or property damage, as well as workers’ compensation insurance, in each case with respect to the Real Property Assets with insurers having an A.M. Best policyholders’ rating of not less than A-VIII in amounts that prudent owner of assets such as the Real Property Assets would maintain.

Section 4.28 Anti-Corruption Laws and Sanctions . The Borrower has implemented and maintains in effect commercially reasonable policies and procedures for

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Borrower, its Subsidiaries and their respective directors, officers, employees and agents (which such Persons, for the purposes of the first sentence of this Section 4.28, shall not include any third-party joint-venture partner or member of any Subsidiary) designed to comply with Anti-Corruption Laws and Sanctions applicable to the Borrower and its Subsidiaries, and the Borrower, its Subsidiaries and their respective directors and officers and to the knowledge of the Borrower its employees and agents, are in compliance in all material respects with any applicable Anti-Corruption Laws and Sanctions. None of (a) the Borrower or any Subsidiary, or (b) to the knowledge of the chief executive officer, chief financial officer or chief operating officer of the Borrower, any agent, director, officer or employee of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds or other transaction contemplated by this Agreement will violate any Anti-Corruption Law or Sanctions applicable to the Borrower and its Subsidiaries. None of the Borrower, any Subsidiary of the Borrower, or, to the knowledge of the chief executive officer, chief financial officer or chief operating officer of the Borrower, any director, officer or employee thereof is currently in violation of any Anti-Corruption Laws.

Section 4.29 EEA Financial Institutions . Neither the General Partner nor the Borrower is an EEA Financial Institution.

ARTICLE V

AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank has any Commitment hereunder or any Loan or Letter of Credit is outstanding or any Obligations remain unpaid:
Section 5.1 Information . The Borrower will deliver:

(a) to the Administrative Agent and to each of the Banks (which delivery may be made electronically, including via IntraLinks), as soon as available and in any event within 105 days after the end of each fiscal year of the Borrower, an audited consolidated balance sheet of the Borrower as of the end of such fiscal year and the related consolidated statements of cash flow and operations for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, audited by Deloitte & Touche or other independent public accountants of similar standing;

(b) to the Administrative Agent and to each of the Banks (which delivery may be made electronically, including via IntraLinks), as soon as available and in any event within sixty (60) days after the end of each quarter of each fiscal year (other than the last quarter in any fiscal year) of the Borrower, a statement of the Borrower, prepared in accordance with GAAP, setting forth the operating income and operating expenses of the Borrower, in sufficient detail so as to calculate Unencumbered Asset Pool Net Operating Cash Flow of the Borrower for the immediately preceding quarter;


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(c) to the Administrative Agent and to each of the Banks (which delivery may be made electronically, including via IntraLinks), simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer, controller, treasurer or vice president-corporate finance of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Section 5.8 on the date of such financial statements; (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; and (iii) certifying (x) that such financial statements fairly present the financial condition and the results of operations of the Borrower as of the dates and for the periods indicated, in accordance with GAAP, subject, in the case of interim financial statements, to normal year-end adjustments, and (y) that such officer has reviewed the terms of the Loan Documents and has made, or caused to be made under his or her supervision, a review in reasonable detail of the business and condition of the Borrower during the period beginning on the date through which the last such review was made pursuant to this Section 5.1(c) and ending on a date not more than ten (10) Domestic Business Days prior to the date of such delivery and that on the basis of such review of the Loan Documents and the business and condition of the Borrower, to the best knowledge of such officer, no Default or Event of Default under any other provision of Section 6.1 occurred or, if any such Default or Event of Default has occurred, specifying the nature and extent thereof and, if continuing, the action the Borrower proposes to take in respect thereof;

(d) to the Administrative Agent and to each of the Banks, (i) within five (5) days after the president, chief financial officer, treasurer, controller or other executive officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the president of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; and (ii) promptly and in any event within ten (10) days after the Borrower obtains knowledge thereof, notice of (x) any litigation or governmental proceeding pending or threatened against the Borrower which is likely to individually or in the aggregate, result in a Material Adverse Effect, and (y) any other event, act or condition which is likely to result in a Material Adverse Effect;

(e) to the Administrative Agent and to each of the Banks, if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make

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any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take;

(f) to the Administrative Agent and to each of the Banks, promptly and in any event within five (5) Domestic Business Days after the Borrower obtains actual knowledge of any of the following events, a certificate of the Borrower executed by an officer of the Borrower specifying the nature of such condition and the Borrower’s, and if the Borrower has actual knowledge thereof, the Environmental Affiliate’s proposed initial response thereto: (i) the receipt by the Borrower, or, if the Borrower has actual knowledge thereof, any of the Environmental Affiliates, of any communication (written or oral), whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Borrower, or, if the Borrower has actual knowledge thereof, any of the Environmental Affiliates, is not in compliance with applicable Environmental Laws, and such noncompliance is likely to have a Material Adverse Effect, (ii) the Borrower shall obtain actual knowledge that there exists any Environmental Claim which is likely to have a Material Adverse Effect pending or threatened against the Borrower or any Environmental Affiliate or (iii) the Borrower obtains actual knowledge of any release, emission, discharge or disposal of any Material of Environmental Concern that is likely to form the basis of any Environmental Claim against the Borrower or any Environmental Affiliate;

(g) to the Administrative Agent and to each of the Banks, promptly and in any event within five (5) Domestic Business Days after receipt of any material notices or correspondence from any company or agent for any company providing insurance coverage to the Borrower relating to any material loss or loss of the Borrower with respect to any of the Unencumbered Asset Pool Properties, copies of such notices and correspondence; and

(h) to the Administrative Agent and to each of the Banks (which delivery may be made electronically, including via IntraLinks or posting to the internet website of the General Partner), promptly upon the mailing thereof to the shareholders or partners of the Borrower, copies of all financial statements, reports and proxy statements so mailed;

(i) to the Administrative Agent and to each of the Banks (which delivery may be made electronically, including via IntraLinks or posting to the internet website of the General Partner), promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission;

(j) to the Administrative Agent and to each of the Banks (which delivery may be made electronically, including via IntraLinks), simultaneously with delivery of the information required by Sections 5.1(a) and (b), a statement of Unencumbered Asset Pool Net Operating Cash Flow with respect to each Unencumbered Asset Pool Property and a list of all Unencumbered Asset Pool Properties; and


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(k) to the Administrative Agent and to each of the Banks (which delivery may be made electronically, including via IntraLinks), from time to time such additional information regarding the financial position or business of the Borrower as the Administrative Agent, at the request of any Bank, may reasonably request.

Section 5.2 Payment of Obligations . The Borrower will pay and discharge, at or before maturity, all its material obligations and liabilities including, without limitation, any obligation pursuant to any agreement by which it or any of its properties is bound and any tax liabilities, in any case, where failure to do so will likely result in a Material Adverse Effect except (i) such tax liabilities may be contested in good faith by appropriate proceedings, and the Borrower will maintain in accordance with GAAP, appropriate reserves for the accrual of any of the same; or (ii) such obligation or liability as may be contested in good faith by appropriate proceedings.

Section 5.3 Maintenance of Property; Insurance .

(a) The Borrower will keep each of the Unencumbered Asset Pool Properties in good repair, working order and condition, subject to ordinary wear and tear.

(b) The Borrower shall (a) maintain insurance as specified in Section 4.27 hereof with insurers meeting the qualifications described therein, which insurance shall in any event not provide for materially less coverage than the insurance in effect on the Closing Date, and (b) furnish to each Bank, or use reasonable efforts to obtain from a tenant, if applicable, from time to time, upon written request, copies of the policies under which such insurance is issued, certificates of insurance and such other information relating to such insurance as such Bank may reasonably request. The Borrower will deliver to the Banks (i) upon request of any Bank through the Administrative Agent from time to time, full information as to the insurance carried, (ii) within five (5) days of receipt of notice from any insurer, a copy of any notice of cancellation or material change in coverage from that existing on the date of this Agreement and (iii) forthwith, notice of any cancellation or nonrenewal of coverage by the Borrower.

Section 5.4 Conduct of Business . The Borrower’s primary business will continue to be acquiring, owning, operating, managing, developing (to the extent permitted in this Agreement), and leasing office and industrial properties.

Section 5.5 Compliance with Laws . (a) The Borrower will comply in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws, all zoning and building codes and ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. The Borrower will maintain in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

(b) In the ordinary course of its business and at such times as the Borrower reasonably deems appropriate, the Borrower shall conduct periodic reviews of the effect of Environmental Laws on its business, operations and properties, in the course of which it shall use

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commercially reasonable efforts to identify and evaluate applicable liabilities and costs (including, without limitation, any capital or operating expenditures required as a matter of Environmental Law for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required as a matter of Environmental Law to achieve or maintain compliance with Environmental Law or as a condition of any license, permit or contract to which the Borrower is a party or a beneficiary, any related constraints on operating activities, including, without limitation, any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, any costs or liabilities in connection with off-site disposal of wastes or Materials of Environmental Concern, and any actual or potential liabilities to third parties, including, without limitation, employees, and any related costs and expenses). The Borrower shall notify the Administrative Agent immediately if, on the basis of any such review, the Borrower has reasonably concluded that such associated potential liabilities and costs, including, without limitation, the costs of compliance with Environmental Laws, could reasonably be expected to have a Material Adverse Effect.

(c) Neither the Borrower nor the General Partner shall become (i) an employee benefit plan subject to Title I of ERISA, (ii) a plan or account subject to Section 4975 of the Internal Revenue Code, (iii) an entity deemed under Department of Labor Regulation Section 2510.3-101 to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code, or (iv) a “governmental plan” within the meaning of Section 3(32) of ERISA.

Section 5.6 Inspection of Property, Books and Records . The Borrower will keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit representatives of any Bank at such Bank’s expense to visit and inspect any of its properties to examine and make abstracts from any of its books and records and to discuss its affairs, finances and accounts with its officers and employees, all at such reasonable times, upon reasonable notice, but in no event more than once each fiscal year unless an Event of Default has occurred and is continuing, then as often as may reasonably be desired.

Section 5.7 Existence .

(a) The Borrower shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence or its partnership existence, as applicable.

(b) The Borrower shall do or cause to be done all things necessary to preserve and keep in full force and effect its patents, trademarks, servicemarks, tradenames, copyrights, franchises, licenses, permits, certificates, authorizations, qualifications, accreditations, easements, rights of way and other rights, consents and approvals the nonexistence of which is likely to have a Material Adverse Effect.

Section 5.8 Financial Covenants .

(a) Total Debt to Total Asset Value . As of the last day of each calendar quarter, the Total Debt Ratio will not be greater than 60%; provided, however, with respect to any period in which the Borrower or any of its Consolidated Subsidiaries have acquired a Real

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Property Asset (or multiple Real Property Assets in a single transaction) for a price of more than $200,000,000, Total Debt to Total Asset Value for such quarter and the next three (3) quarters may increase to 65%, provided such ratio does not exceed 60% thereafter.

(b) Fixed Charge Coverage . As of the last day of each calendar quarter, the ratio of (x) Annual EBITDA, less reserves for Capital Expenditures of (i) $.25 per square foot per annum for each Real Property Asset that is an office or retail property and (ii) $250 per unit for each Real Property Asset that is a multi-family residential property, to (y) the sum of (i) Total Debt Service and (ii) dividends or other payments payable by the General Partner with respect to any preferred stock issued by the General Partner and distributions or other payments payable by the Borrower with respect to any preferred partnership units of the Borrower, will not be less than 1.5:1.0.

(c) Limitation on Secured Debt . Secured Debt of the Borrower, the General Partner and their Consolidated Subsidiaries, which for purposes hereof shall be deemed to include the Borrower’s and the General Partner’s pro rata share of the Secured Debt of any Minority Holdings of the Borrower or the General Partner, shall at no time exceed forty percent (40%) of Total Asset Value.

(d) Unsecured Debt Ratio . As of each of (x) the last day of each calendar quarter, and (y) any Borrowing, the Unsecured Debt Ratio shall not be less than 1.67:1.0; provided, however, with respect to any period in which the Borrower or any of its Consolidated Subsidiaries have acquired a Real Property Asset (or multiple Real Property Assets in a single transaction) for a price of more than $200,000,000, the Unsecured Debt Ratio for such quarter and the next succeeding three (3) quarters may decrease to 1.55:1.00, provided such ratio is not less than 1.67:1.00 thereafter.

(e) Unencumbered Asset Pool Debt Service Coverage . As of the last day of each calendar quarter and as of the date of any sale or secured financing of any Unencumbered Asset Pool Property, the ratio of (i) Unencumbered Asset Pool Net Operating Cash Flow to (ii) Unsecured Debt Service will not be less than 1.75:1.0.

(f) Dividends . During an Event of Default, the Borrower will not, as determined on an aggregate annual basis, pay any partnership distributions in excess of the amount which results in distributions to the General Partner (in an amount sufficient to permit the General Partner to pay dividends to its shareholders which it reasonably believes are necessary for it to (A) maintain its qualification as a REIT for federal and state income tax purposes, and (B) avoid the payment of federal or state income or excise tax.

Section 5.9 Restriction on Fundamental Changes; Operation and Control . (a) The Borrower shall not enter into any merger or consolidation, unless the Borrower is the surviving entity, or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), discontinue its business or convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, any substantial part of the business or property of the Borrower and its Subsidiaries, taken as a whole, whether now or hereafter acquired, hold an interest in any subsidiary which is not controlled by the Borrower or the General Partner or enter into other

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business lines, without the prior written consent of the Administrative Agent, which consent shall not be given unless the Required Banks so consent.

(b) The Borrower shall not amend its articles of incorporation, by-laws or agreement of limited partnership, as applicable, in any material respect which is reasonably likely to have an adverse effect on the Banks, without the Administrative Agent’s consent, which shall not be unreasonably withheld or delayed.

Section 5.10 Changes in Business . The Borrower shall not enter into any business which is substantially different from that conducted by the Borrower on the Closing Date after giving effect to the transactions contemplated by the Loan Documents.

Section 5.11 Sale of Unencumbered Asset Pool Properties . Concurrent with the sale or transfer of any Unencumbered Asset Pool Property that exceeds fifteen percent (15%) of the Unencumbered Asset Pool Properties Value, the Borrower shall (i) deliver written notice to the Administrative Agent, (ii) deliver to the Administrative Agent a certificate from its chief financial officer, chief accounting officer, vice president or other duly authorized officer certifying that at the time of such sale or other disposal (based on pro-forma calculations for the previous period assuming that such Unencumbered Asset Pool Property was not a Unencumbered Asset Pool Property for the relevant period) all of the covenants contained in Section 5.8 are and after giving effect to the transaction shall continue to be true and accurate in all respects, and (iii) pay to the Administrative Agent an amount equal to that, if any, required pursuant to Section 2.10(a). In the event that a Separate Parcel that originally formed a part of a Unencumbered Asset Pool Property is to be sold or transferred, the value of the remaining portion of the Unencumbered Asset Pool Property will be determined by Administrative Agent at the time of sale or transfer in its sole discretion.

Section 5.12 Fiscal Year; Fiscal Quarter . The Borrower shall not change its fiscal year or any of its fiscal quarters without the Administrative Agent’s prior written consent, which consent shall not be unreasonably withheld or delayed.

Section 5.13 Margin Stock . None of the proceeds of the Loans will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock.

Section 5.14 Use of Proceeds . The Borrower shall use the proceeds of the Loans for its general business purposes; provided, however, that no Swingline Loan shall be used for the purpose of refinancing another Swingline Loan, in whole or part. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. Letters of Credit will be issued only to support the Borrower’s general business purposes. The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any

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Sanctioned Country, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

Section 5.15 General Partner Status . The General Partner shall at all times (i) maintain its status as a self-directed and self-administered REIT, and (ii) remain a publicly traded company listed on the New York Stock Exchange.

Section 5.16 Specified Unencumbered Real Property Assets; Specified Norges JV Assets . The Borrower shall not amend, modify or assign any documentation relating to the Specified Unencumbered Real Property Assets or the Specified Norges JV Assets (including documentation relating to the intercompany debt) in a manner that is reasonably likely to have a material adverse effect on the Banks without the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld or delayed.

ARTICLE VI

DEFAULTS
Section 6.1 Events of Default . Each of the following shall constitute an event of default under this Agreement (an “Event of Default”):

(a) (i) the Borrower shall fail to pay when due any principal of any Loan, or (ii) the Borrower shall fail to pay when due any interest on any Loan, any fees or any amounts payable hereunder within three (3) Domestic Business Days after the same is due;

(b) the Borrower shall fail to observe or perform any covenant contained in Section 5.7(a) (with respect to the Borrower’s existence) or Sections 5.8 to 5.16, inclusive, subject to any applicable grace periods set forth therein;

(c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Borrower by the Administrative Agent;

(d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made);

(e) the Borrower, the General Partner or any Material Subsidiary shall default in the payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) of any amount owing in respect of any Recourse Debt or Debt guaranteed by the Borrower, the General Partner or such Material Subsidiary (other than the Obligations) in an aggregate principal amount of more than $50,000,000 and such default shall continue beyond the giving of any required notice and the expiration of any applicable grace period (as the same may be extended by the applicable lender) and such default shall not be waived by the applicable lender (which waiver shall serve to reinstate the applicable loan), or the Borrower, the General Partner or any Material Subsidiary shall default in the performance or observance of any obligation or condition with respect to any such Debt or any other event shall occur or condition

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exist beyond the giving of any required notice and the expiration of any applicable grace period (as the same may be extended by the applicable lender), if in any such case as a result of such default, event or condition, the lender (including the holder or holders thereof, or any trustee or agent for such holders) of any such Debt shall accelerate the maturity of any such Debt or shall be permitted (without any further requirement of notice or lapse of time), to accelerate the maturity of any such Debt, and such default shall not be waived by the applicable lender (which waiver shall serve to reinstate the applicable loan), or any such Debt shall become or be declared to be due and payable prior to its stated maturity other than as a result of a regularly scheduled payment;

(f) the Borrower, the General Partner or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

(g) an involuntary case or other proceeding shall be commenced against the Borrower, the General Partner or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower, the General Partner or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect;

(h) the Borrower shall default in its obligations under any Loan Document other than this Agreement beyond any applicable notice and grace periods;

(i) the General Partner shall default in its obligations under the Guaranty beyond any applicable notice and grace periods;

(j) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $1,000,000 which it shall have become liable to pay under Title IV of ERISA, or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing, or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan, or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated, or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $1,000,000;



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(k) one or more final nonappealable judgments or decrees in an aggregate amount of $10,000,000 as of such date shall be entered by a court or courts of competent jurisdiction against the Borrower or the General Partner (other than any judgment as to which, and only to the extent, a reputable insurance company has acknowledged coverage of such claim in writing) and (i) any such judgments or decrees shall not be stayed, discharged, paid, bonded or vacated within thirty (30) days (or bonded, vacated or satisfied within thirty (30) after any stay is lifted) or (ii) enforcement proceedings shall be commenced by any creditor on any such judgments or decrees;

(l) (i) any Environmental Claim shall have been asserted against the Borrower or any Environmental Affiliate, (ii) any release, emission, discharge or disposal of any Material of Environmental Concern shall have occurred, and such event is reasonably likely to form the basis of an Environmental Claim against the Borrower or any Environmental Affiliate, or (iii) the Borrower or the Environmental Affiliates shall have failed to obtain any Environmental Approval necessary for the ownership, or operation of its business, property or assets or any such Environmental Approval shall be revoked, terminated, or otherwise cease to be in full force and effect, in the case of clauses (i), (ii) or (iii) above, if the existence of such condition has had or is reasonably likely to have a Material Adverse Effect;

(m) (i) during any consecutive twenty-four (24) month period commencing on or after the date hereof, individuals who at the beginning of such period constituted the Board of Directors of the General Partner of the Borrower (together with any new directors whose election by the Board of Directors or whose nomination for election by the General Partner stockholders was approved by a vote of at least a majority of the members of the Board of Directors then in the office who either were members of the Board of Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office, except for any such change resulting from (x) death or disability of any such member, (y) satisfaction of any requirement for the majority of the members of the Board of Directors of the General Partner to qualify under applicable law as independent directors, or (z) the replacement of any member of the Board of Directors who is an officer or employee of the General Partner with any other officer or employee of the General Partner or its Affiliate; (ii) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of equity interests representing more than thirty-five percent (35%) of the aggregate ordinary voting power represented by the issued and outstanding equity interests of the General Partner; (iii) the General Partner (or a wholly-owned subsidiary thereof) ceases to be the sole general partner of the Borrower; or (iv) the General Partner ceases to own, directly or indirectly, at least sixty percent (60%) of the equity interests in the Borrower having the power to vote on matters relating to the management of the Borrower;

(n) the General Partner shall cease at any time to qualify as a REIT; and

(o) at any time, for any reason, the Borrower or the General Partner seeks to repudiate its obligations under any Loan Document.



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Section 6.2 Rights and Remedies . (a) Upon the occurrence of any Event of Default described in Sections 6.1(f) or (g), the Commitments shall automatically terminate and the unpaid principal amount of, and any and all accrued interest on, the Loans and any and all accrued fees and other Obligations hereunder shall automatically become immediately due and payable, with all additional interest from time to time accrued thereon and without presentment, demand, or protest or other notices or requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of acceleration), all of which are hereby expressly waived by the Borrower; and upon the occurrence and during the continuance of any other Event of Default, the Administrative Agent may, and at the request of the Required Banks shall, exercise any of its rights and remedies hereunder and by written notice to the Borrower, declare the Commitment(s) of each Bank to make Loans to be terminated whereupon the same shall forthwith terminate, declare the unpaid principal amount of and any and all accrued and unpaid interest on the Loans and any and all accrued fees and other Obligations hereunder to be, and the same shall thereupon be, immediately due and payable with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind other than as provided in the Loan Documents (including, without limitation, valuation and appraisement, diligence, presentment, and notice of intent to demand or accelerate), all of which are hereby expressly waived by the Borrower.

(b) Notwithstanding the foregoing, upon the occurrence and during the continuance of any Event of Default other than any Event of Default described in Sections 6.1(f) or (g), the Administrative Agent shall not exercise any of its rights and remedies hereunder nor declare the unpaid principal amount of and any and all accrued and unpaid interest on the Loans and any and all accrued fees and other Obligations hereunder to be immediately due and payable, until such time as the Administrative Agent shall have delivered a notice to the Banks specifying the Event of Default which has occurred and whether Administrative Agent recommends the acceleration of the Obligations due hereunder or the exercise of other remedies hereunder. The Banks shall notify the Administrative Agent if they approve or disapprove of the acceleration of the Obligations due hereunder or the exercise of such other remedy recommended by Administrative Agent within five (5) Domestic Business Days after receipt of such notice. If any Bank shall not respond within such five (5) Domestic Business Day period, then such Bank shall be deemed to have accepted Administrative Agent’s recommendation for acceleration of the Obligations due hereunder or the exercise of such other remedy. Regardless of the Administrative Agent’s recommendation, if the Required Banks shall approve the acceleration of the Obligations due hereunder or the exercise of such other remedy, then Administrative Agent shall declare the Commitment(s) of each Bank to make Loans to be terminated whereupon the same shall forthwith terminate and declare the unpaid principal amount of and any and all accrued and unpaid interest on the Loans and any and all accrued fees and other Obligations hereunder to be immediately due and payable or exercise such other remedy approved by the Required Banks. If the Required Banks shall neither approve nor disapprove the acceleration of the Obligations due hereunder or such other remedy recommended by Administrative Agent, then Administrative Agent may accelerate the Obligations due hereunder or exercise any of its rights and remedies hereunder in its sole discretion. If the Required Banks shall disapprove the acceleration of the Obligations due hereunder or the exercise of such other remedy recommended by Administrative Agent, but approve of another remedy, then to the extent permitted hereunder, Administrative Agent shall exercise such remedy. In the event the Administrative Agent

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exercises any remedy provided in any of the Loan Documents, the Administrative Agent shall act as a collateral agent for the Banks.

(c) Notwithstanding the foregoing, if in Administrative Agent’s sole judgment, immediate action is required after an Event of Default has occurred to prevent loss to the Banks, the Administrative Agent may exercise any of its rights and remedies pursuant to this Agreement, including, without limitation, acceleration of the Obligations hereunder, without the prior consent of the Required Banks provided that the Administrative Agent has notified the Banks of its intention so to exercise such rights and remedies and within 48 hours (such hours being counted only on Domestic Business Days) thereafter the Required Banks have not instructed the Administrative Agent to the contrary.

Sectiion 6.3 Notice of Default . If the Administrative Agent shall not already have given any notice to the Borrower under Section 6.1, the Administrative Agent shall give notice to the Borrower under Section 6.1 promptly upon being requested to do so by the Required Banks and shall thereupon notify all the Banks thereof.

Section 6.4 Actions in Respect of Letters of Credit . (a) If, at any time and from time to time, any Letter of Credit shall have been issued hereunder and an Event of Default shall have occurred and be continuing, then, upon the occurrence and during the continuation thereof, the Administrative Agent may, and if requested by the Required Revolving Credit Banks the Administrative Agent shall, whether in addition to the taking by the Administrative Agent of any of the actions described in this Article or otherwise, make a demand upon the Borrower to, and forthwith upon such demand (but in any event within ten (10) days after such demand) the Borrower shall, pay to the Administrative Agent, on behalf of the Revolving Credit Banks, in same day funds at the Administrative Agent’s office designated in such demand, for deposit in a special cash collateral account (the “ Letter of Credit Collateral Account ”) to be maintained in the name of the Administrative Agent (on behalf of the Revolving Credit Banks) and under its sole dominion and control at such place as shall be designated by the Administrative Agent, an amount equal to the amount of the Letter of Credit Usage under the Letters of Credit; provided that if an Event of Default described in Section 6.1(f) or (g) has occurred and is continuing, such obligation of the Borrower to deliver such amounts to the Cash Collateral Account shall become automatically due and payable without presentment, demand, protest or other notices or requirements of any kind, all of which are hereby expressly waived by the Borrower. The Borrower shall also deposit amounts into the Letter of Credit Collateral Account in accordance with Section 9.8(c)(ii). Interest shall accrue on the Letter of Credit Collateral Account at a rate equal to the rate on overnight funds.

(b) The Borrower hereby pledges, assigns and grants to the Administrative Agent, as administrative agent for its benefit and the ratable benefit of the Revolving Credit Banks a lien on and a security interest in, the following collateral (the “ Letter of Credit Collateral” ):

(i) the Letter of Credit Collateral Account, all cash deposited therein and all certificates and instruments, if any, from time to time representing or evidencing the Letter of Credit Collateral Account;



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(ii) all notes, certificates of deposit and other instruments from time to time hereafter delivered to or otherwise possessed by the Administrative Agent for or on behalf of the Borrower in substitution for or in respect of any or all of the then existing Letter of Credit Collateral;

(iii) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Letter of Credit Collateral; and

(iv) to the extent not covered by the above clauses, all proceeds of any or all of the foregoing Letter of Credit Collateral.

The lien and security interest granted hereby secures the payment of all obligations of the Borrower now or hereafter existing hereunder and under any other Loan Document.
(c) The Borrower hereby authorizes the Administrative Agent for the ratable benefit of the Revolving Credit Banks to apply, from time to time after funds are deposited in the Letter of Credit Collateral Account, funds then held in the Letter of Credit Collateral Account to the payment of any amounts, in such order as the Administrative Agent may elect, as shall have become due and payable by the Borrower to the Revolving Credit Banks in respect of the Letters of Credit.

(d) Neither the Borrower nor any Person claiming or acting on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Letter of Credit Collateral Account, except as provided in Section 6.4(h) hereof.

(e) The Borrower agrees that it will not (i) sell or otherwise dispose of any interest in the Letter of Credit Collateral or (ii) create or permit to exist any lien, security interest or other charge or encumbrance upon or with respect to any of the Letter of Credit Collateral, except for the security interest created by this Section 6.4.

(f) If any Event of Default shall have occurred and be continuing:

(i) The Administrative Agent may, in its sole discretion, without notice to the Borrower except as required by law and at any time from time to time, charge, set off or otherwise apply all or any part of the Letter of Credit Collateral first, (x) amounts previously drawn on any Letter of Credit that have not been reimbursed by the Borrower and (y) any Letter of Credit Usage described in clause (ii) of the definition thereof that are then due and payable and second, with the consent of the Required Revolving Credit Banks, any other unpaid Obligations then due and payable against the Letter of Credit Collateral Account or any part thereof, in such order as the Administrative Agent shall elect. The rights of the Administrative Agent under this Section 6.4 are in addition to any rights and remedies which any Revolving Credit Bank may have.

(ii) The Administrative Agent may also exercise, in its sole discretion, in respect of the Letter of Credit Collateral Account, in addition to the other rights and remedies provided herein or otherwise available to it, all the rights and remedies of a

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secured party upon default under the Uniform Commercial Code in effect in the State of New York at that time.

(g) The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Letter of Credit Collateral if the Letter of Credit Collateral is accorded treatment substantially equal to that which the Administrative Agent accords its own property, it being understood that, assuming such treatment, the Administrative Agent shall not have any responsibility or liability with respect thereto.

(h) At such time as (x) all Events of Default have been cured or waived in writing and (y) all cash collateral (or the appropriate portion thereof) provided to reduce the Fronting Banks’ exposure to any Defaulting Lender’s Letter of Credit Usage pursuant to Section 9.8(c)(ii) shall no longer be required to be held as cash collateral pursuant to this Section 6.4 as a result of (x) the elimination or reduction of the applicable exposure to a Defaulting Lender’s Letter of Credit Usage (including by the termination of the Defaulting Lender status of such Bank) or (y) the Administrative Agent’s determination that there exists excess cash collateral, all amounts (or excess portion thereof) remaining in the Letter of Credit Collateral Account shall be promptly returned to the Borrower; provided that the Borrower and each applicable Fronting Bank may agree to continue to hold cash collateral to support future anticipated exposure to a Defaulting Lender’s Letter of Credit Usage. Absent such cure or written waiver, any surplus of the funds held in the Letter of Credit Collateral Account and remaining after payment in full of all of the Obligations of the Borrower hereunder and under any other Loan Document after the Maturity Date and cancellation or return of all Letters of Credit shall be paid to the Borrower or to whomsoever may be lawfully entitled to receive such surplus.

ARTICLE VII

THE ADMINISTRATIVE AGENT
Section 7.1 Appointment and Authorization . Each Bank and each Fronting Bank irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Except as otherwise expressly permitted by this Agreement or with the prior written consent of the Administrative Agent, only the Administrative Agent (and not one or more of the Banks) shall have the authority to deal directly with the Borrower under this Agreement and each Bank acknowledges that all notices, demands or requests from such Bank to Borrower must be forwarded to the Administrative Agent for delivery to the Borrower. Each Bank acknowledges that, except as otherwise expressly set forth in this Agreement, the Borrower has no obligation to act or refrain from acting on instructions or demands of one or more Banks absent written instructions from Administrative Agent in accordance with its rights and authority hereunder.

Section 7.2 Administrative Agent and Affiliates . JPMorgan Chase Bank, N.A. shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and JPMorgan Chase Bank, N.A. and its Affiliates may accept deposits from, lend money to, and

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generally engage in any kind of business with the Borrower or any subsidiary or Affiliate of the Borrower as if it were not the Administrative Agent hereunder, and the term “Bank” and “Banks” shall include JPMorgan Chase Bank, N.A. in its individual capacity.

Section 7.3 Action by Administrative Agent . (a) The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. The Administrative Agent shall not have by reason of the execution and delivery of the Loan Documents to which it is a party, the performance of any of its obligations thereunder, or by the use of the term “Administrative Agent”, a fiduciary relationship in respect of any Bank or the Borrower.

(b) The Administrative Agent shall promptly forward, or make available by Intralinks or other internet access system, to each Bank tangible or electronic copies, or notify (in writing or electronically and, if electronically, the Administrative Agent will also transmit a fax indicating that the information in question is being transmitted electronically) each Bank as to the contents, of all notices, financial statements and other significant materials and communications received from the Borrower pursuant to the terms of this Agreement or any other Loan Document and, in the event that the Borrower fails to pay when due the principal of or interest on any Loan, the Administrative Agent shall promptly give notice thereof to the Banks. As to any matters not expressly provided for by the Loan Documents, the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks, and such instructions shall be binding upon all the Banks; provided, however, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement or applicable law. If the Borrower shall have made any payment of principal of and interest on the Loans or any other amount due hereunder in accordance with Article II hereof and the Administrative Agent shall not have distributed to each Bank its proper share of such payment on the date on which such payment shall be received (other than as a result of any shutdown of or disturbance in any payment system or any other event or circumstance beyond the reasonable control of the Administrative Agent), then the Administrative Agent shall pay such proper share to such Bank together with interest thereon at the Federal Funds Rate for each day from the date such payment shall have been received from the Borrower until the date such amount is paid by the Administrative Agent to such Bank. If any Bank transfers funds to the Administrative Agent in anticipation of the making of a Loan that is subsequently not made, then the Administrative Agent agrees to repay such funds to such Bank upon the receipt of a notice from such Bank requesting the repayment of such funds, together with interest thereon at the Federal Funds Rate for each day from the date which is the day upon which Administrative Agent shall have received a notice from such bank requesting the repayment of such funds until the date such amount is paid by the Administrative Agent to such Bank.

Section 7.4 Consultation with Experts . The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.


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Section 7.5 Liability of Administrative Agent . The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing as directed by the Required Banks (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in this Agreement), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. Neither the Administrative Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or, where required by the terms of this Agreement, all of the Banks, or (ii) in the absence of its own gross negligence or willful misconduct. Except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge of any Default (other than a Default under Section 6.1(a) with respect to the payment of principal, interest, facility fees or Letter of Credit Fees) unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Bank. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder or the contents of any report or certificate delivered hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Administrative Agent; (iv) the validity, effectiveness or genuineness of this Agreement, the other Loan Documents or any other instrument or writing furnished in connection herewith; or (v) the contents of any certificate, report or other document delivered hereunder or in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be sent by electronic means) believed by it in good faith to be genuine or to be signed by the proper party or parties. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it in good faith to be made by the proper Person, and shall not incur any liability for relying thereon.

Section 7.6 Indemnification . (a) Each Bank shall, ratably in accordance with its Aggregate Exposure Percentage, indemnify the Administrative Agent, their Affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees’ gross negligence or willful misconduct as finally determined by a court of competent jurisdiction) that such indemnitees may suffer or incur as a result of, or in connection with, the Administrative Agent’s capacity as Administrative Agent in connection with this Agreement, the other Loan Documents or any

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action taken or omitted by such indemnitees in accordance with this Agreement, including any amounts that the Borrower fails to pay under Section 9.3(a).

(b) Each Revolving Credit Bank shall, ratably in accordance with its Revolving Commitment Percentage, indemnify the Fronting Banks, the Swingline Lenders, their Affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees’ gross negligence or willful misconduct as finally determined by a court of competent jurisdiction) that such indemnitees may suffer or incur as a result of, or in connection with, the Administrative Agent’s capacity as Administrative Agent in connection with this Agreement, the other Loan Documents or any action taken or omitted by such indemnitees in accordance with this Agreement, including any amounts that the Borrower fails to pay under Section 9.3(a).

Section 7.7 Credit Decision . Each Bank acknowledges and agrees that the extensions of credit made hereunder are commercial loans and letters of credit and not investments in a business enterprise or securities. Each Bank further represents that it is engaged in making, acquiring or holding commercial loans in the ordinary course of its business and has, independently and without reliance upon the Administrative Agent, any arranger of this credit facility or any other Bank and their respective Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement as a Bank, and to make, acquire or hold Loans hereunder. Each Bank shall, independently and without reliance upon the Administrative Agent, any arranger of this credit facility or any other Bank and their respective Related Parties and based on such documents and information (which may contain material, non-public information within the meaning of the United States securities laws concerning the Borrower and its Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder and in deciding whether or to the extent to which it will continue as a Bank or assign or otherwise transfer its rights, interests and obligations hereunder.

Section 7.8 Successor Administrative Agent . The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. In addition, if the Administrative Agent at any time shall have been finally determined to have committed gross negligence or willful misconduct in connection with its performance of its duties as Administrative Agent hereunder or if the Commitment of the Administrative Agent, in its capacity as a Bank, inclusive of participations, shall be less than $10,000,000, then, upon notice from the Required Banks, the Administrative Agent shall resign. Upon any such resignation, the Required Banks shall have the right to appoint a successor Administrative Agent with the consent of the Borrower (which consent will not be unreasonably withheld or delayed); provided that the consent of the Borrower shall not be required if an Event of Default shall have occurred and be continuing. If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, with the reasonable approval of the Borrower provided that no Event of Default shall have occurred and be outstanding, which

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shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000, total assets of at least $25,000,000,000 and a long-term senior unsecured indebtedness rating of BBB+ or better by S&P (if rated by S&P) and Baa1 by Moody’s (if rated by Moody’s). Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder first accruing or arising after the effective date of such retirement. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent.

If, at any time during the Availability Period, the Administrative Agent shall no longer have any Commitment or hold outstanding Loans under this Agreement, the Administrative Agent shall give notice of its offer to resign to the Banks and the Borrower. Upon any such offer of resignation, the Required Banks shall have the right to appoint a successor Administrative Agent or to retain the Administrative Agent with the consent of the Borrower; provided that the consent of the Borrower shall not be required if an Event of Default shall have occurred and be continuing.
Section 7.9 Administrative Agent’s Fee . The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent.

Section 7.10 Copies of Notices . The Administrative Agent shall deliver to each Bank a copy of any notice sent to the Borrower by the Administrative Agent in connection with the performance of its duties as the Administrative Agent hereunder; and the Administrative Agent shall deliver to each Bank a copy of any notice sent to the Administrative Agent by the Borrower in connection with any Default or Event of Default hereunder.

Section 7.11 Sub-Agents . The Administrative Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

ARTICLE VIII

CHANGE IN CIRCUMSTANCES
Section 8.1 Alternate Rate of Interest . If prior to the commencement of any Interest Period for a Euro-Dollar Borrowing:
 

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(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted London Interbank Offered Rate or the London Interbank Offered Rate, as applicable, for such Interest Period; or

(b) the Administrative Agent is advised by the Majority Facility Banks for the applicable Facility that the Adjusted London Interbank Offered Rate or the London Interbank Offered Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Banks (or Bank) of making or maintaining their Loans (or its Loan) included in such Borrowing under such Facility for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Banks by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Banks that the circumstances giving rise to such notice no longer exist, (i) any Notice of Interest Rate Election that requests the conversion of any Borrowing under such Facility to, or continuation of any Borrowing under such Facility as, a Euro-Dollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Euro-Dollar Borrowing under such Facility, such Borrowing shall be made as an Base Rate Borrowing; provided that if the circumstances giving rise to such notice affect only Borrowings under a particular Facility, then the Borrowings under the other Facility shall be permitted.
Section 8.2 Illegality . If, after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any existing applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans or Money Market Loans, or, with respect to Revolving Credit Banks, to participate in any Letter of Credit issued by a Fronting Bank, or, with respect to a Fronting Bank, to issue any Letter of Credit, and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make or convert Euro-Dollar Loans or Money Market Loans, or with respect to Revolving Credit Banks, to participate in any Letter of Credit issued by a Fronting Bank or, with respect to a Fronting Bank, to issue any Letter of Credit, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans or Money Market Loans (as the case may be) to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan or Money Market Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related

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Euro-Dollar Loans or Money Market Loans of the other Banks), and such Bank shall make such a Base Rate Loan.

Section 8.3 Increased Cost and Reduced Return .

(a) If, after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption or taking effect of any applicable law, rule, treaty or regulation, or any change in any applicable law, rule, directive, decision, treaty or regulation, or any change in the interpretation, re-interpretation, application or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof (“ Change in Law ”), or compliance by any Bank (or its Applicable Lending Office) with any request, decision or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System (but excluding with respect to any Euro-Dollar Loan any such requirement reflected in an applicable Euro-Dollar Reserve Percentage)), special deposit, liquidity, insurance charge or assessment, or similar requirement (including any compulsory loan requirement) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the London interbank market any other condition, cost or expenses (other than Taxes) affecting its Euro-Dollar Loans or Money Market LIBOR Loans, its Notes, or its obligation to make Euro-Dollar Loans or subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making, continuing, converting or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Notes with respect thereto or to increase the cost to such Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Bank hereunder (whether of principal, interest or otherwise), by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), which demand shall be accompanied by a certificate showing, in reasonable detail, the calculation of such amount or amounts, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. For purposes hereof, all requests, rules, guidelines or directives in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act shall be deemed to be a change after the date hereof or after the date of the related Money Market Quote, as applicable, regardless of the date enacted, implemented, adopted or issued and all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities or foreign regulatory authorities, in each case pursuant to Basel III shall be deemed to be such a change regardless of the date adopted, issued, promulgated or implemented (each a “ Regulatory Change ”), provided, however, that if the applicable Bank shall have implemented changes prior to the Closing Date in response to any such requests, rules, guidelines or

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directives, then the same shall not be deemed to be a change after the date hereof or after the date of the related Money Market Quote, as applicable, with respect to such Bank.

(b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital or liquidity requirements, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital or liquidity requirements (whether or not having the force of law) of any such authority, central bank or comparable agency, including any Regulatory Change, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank’s obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital or liquidity requirements) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), which demand shall be accompanied by a certificate showing, in reasonable detail, the calculation of such amount or amounts, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction.

(c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section (although failure or delay on the part of any Bank to provide such notice or to demand compensation pursuant to this Section, after receiving notice of increased cost or reduced rate of return, shall not constitute a waiver of such Bank’s right to demand such compensation unless such failure materially prejudices Borrower’s rights hereunder) and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods.

Section 8.4 Taxes .

(a) Payments Free of Taxes . Any and all payments by or on account of any obligation of the Borrower under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 8.4) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.



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(b) Payment of Other Taxes by the Borrower . The Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.

(c) Evidence of Payments . As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 8.4, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(d) Indemnification by the Borrower . Without duplication of Sections 8.4(a) or (b) above, the Borrower shall indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Bank (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Bank, shall be conclusive absent manifest error. The Administrative Agent shall reasonably cooperate, at its sole discretion and at no cost to the Administrative Agent or the Banks, with efforts by Borrower to recover any Taxes or Other Taxes which Borrower reasonably believes were incorrectly or illegally imposed.

(e) Indemnification by the Banks . Each Bank shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Bank (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Bank’s failure to comply with the provisions of Section 9.6(b) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Bank, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Bank by the Administrative Agent shall be conclusive absent manifest error. Each Bank hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Bank under any Loan Document or otherwise payable by the Administrative Agent to the Bank from any other source against any amount due to the Administrative Agent under this paragraph (e).

(f) Status of Banks . (i) Any Recipient that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, the Recipient, if reasonably requested by the Borrower or the Administrative Agent, shall deliver

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such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Recipient is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 8.4(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Recipient’s reasonable judgment such completion, execution or submission would subject such Recipient to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Recipient.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,

(A)    the Administrative Agent, any sub-agent and any Bank that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which the Administrative Agent becomes the Administrative Agent under this Agreement or such Bank becomes a Bank under this Agreement, as applicable, (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Administrative Agent, sub-agent or Bank, as applicable is exempt from U.S. federal backup withholding tax;
(B)    any Foreign Bank shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Bank becomes a Bank under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(1) in the case of a Foreign Bank claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2) executed copies of IRS Form W-8ECI;

(3) in the case of a Foreign Bank claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit I-1 to the effect that such Foreign Bank is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the

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meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form); or

(4) to the extent a Foreign Bank is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form), a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-2 or Exhibit I-3 , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Bank is a partnership and one or more direct or indirect partners of such Foreign Bank are claiming the portfolio interest exemption, such Foreign Bank may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-4 on behalf of each such direct and indirect partner;

(C)    any Foreign Bank shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Bank becomes a Bank under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. Federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made;
(D)    if a payment made to a Recipient or any sub-agent under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Recipient or sub-agent were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Recipient or sub-agent shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Recipient or sub-agent has complied with such Recipient’s or sub-agent’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement; and
(E)    if the Administrative Agent or sub-agent is not a U.S. Person, the Administrative Agent and sub-agent (and any assignee or successor) will deliver to the Borrower on or prior to the execution and delivery of this Agreement (or, assignment or

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succession, if applicable), two executed copies of IRS Form W-8ECI with respect to any amounts payable to the Administrative Agent or sub-agent, as applicable, for its own account and two duly completed copies of IRS Form W-8IMY (certifying that it is either a “qualified intermediary” or a “U.S. branch”) for the amounts the Administrative Agent or sub-agent, as applicable, receives for the account of others, with the effect that the Borrower can make payments to the Administrative Agent or sub-agent, as applicable, without deduction or withholding of any taxes imposed by the United States.
Each Recipient or sub-agent agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(g) Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 8.4 (including by the payment of additional amounts pursuant to this Section 8.4), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 8.4 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(h) Survival . Each party’s obligations under this Section 8.4 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

(i) Defined Terms . For purposes of this Section 8.4, the term “ Bank ” includes any Fronting Bank and any Swingline Lender and the term “ applicable law ” includes FATCA.

(j) For purposes of determining withholding Taxes imposed under FATCA, from and after the effective date of this Agreement, the Borrower and the Administrative Agent shall treat (and the Banks hereby authorize the Administrative Agent to treat) the Loans as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).


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Section 8.5 Base Rate Loans Substituted for Affected Euro-Dollar Loans . If (i) the obligation of any Bank to make, or convert outstanding Loans to, Euro-Dollar Loans has been suspended pursuant to Sections 8.1 or 8.2 or (ii) any Bank has demanded compensation under Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five (5) Euro-Dollar Business Days’ prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist:

(a) all Loans which would otherwise be made by such Bank as Euro-Dollar Loans shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and

(b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead.

Section 8.6 SPC Loans . Notwithstanding anything to the contrary contained herein, any Bank (a “ Granting Bank ”) may grant to one special purpose funding vehicle (a “ SPC ”) sponsored by such Granting Bank, as identified as such in writing by such Granting Bank to the Administrative Agent and the Borrower from time to time (including, without limitation, by the execution of this Agreement on the date hereof by a Granting Bank and its SPC identified as such on the signature pages hereof), the option to provide to the Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to the terms hereof; provided, that (i) nothing herein shall constitute a commitment to make any Loan by any SPC, and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of such Granting Bank to the same extent, and as if, such Loan were made by such Granting Bank. Any SPC that makes a Loan shall (i) have in regard to such Loan all of the rights (exercisable, however, only through its Granting Bank acting as its agent) that such Granting Bank would have had if it had made such Loan directly, and (ii) comply with this Agreement in regard to such Loan on the same terms as any other Bank party hereto; provided that (A) the Granting Bank’s Commitment shall remain the Commitment of such Granting Bank, and (B) all monetary obligations of an SPC hereunder in respect of any Loan it provides shall remain the obligations of such Granting Bank to the extent at any time that such SPC elects not to or otherwise fails to perform or pay any such obligation. Each party hereto hereby agrees that no SPC shall be liable for any payment under this Agreement for which a Bank would otherwise be liable for so long as, and to the extent, its sponsoring Granting Bank makes such payment. Notwithstanding any Loan that may be provided by an SPC hereunder, the Administrative Agent and Borrower shall be entitled to continue to communicate and deal solely and directly with the Granting Bank in accordance with this Agreement in respect of such Loan. Each SPC that is a signatory hereto, and each SPC that subsequently is identified by its Granting Bank as having been granted such option, shall be deemed to have confirmed (and the Borrower and the Administrative Agent may require a written acknowledgment of such confirmation signed by any SPC not a signatory hereto that is subsequently so identified by its Granting Bank) to the Borrower and the Administrative Agent that (a) it has received a copy of the Agreement and each

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Loan Document, together with copies of the financial statements heretofore provided to the Banks under the terms of this Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; (b) agrees that it will independently and without reliance upon the Administrative Agent, its Granting Bank or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement and any other Loan Document; (c) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and any other Loan Document as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (d) agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and any other Loan Document are required to be performed by it as a Bank, subject to the terms of this Section 8.6; and (e) appoints its Granting Bank, or a specified branch or Affiliate thereof, as its agent and attorney in fact and grants to its Granting Bank an irrevocable power of attorney to receive payments made for the benefit of such SPC under this Agreement, to deliver and receive all communications and notices under this Agreement and other Loan Documents and to exercise on such SPC’s behalf all rights to vote and to grant and make approvals, waivers, consents of amendments to or under this Agreement and other Loan Documents. Any document executed by such agent on such SPC’s behalf in connection with this Agreement or other Loan Documents shall be binding on such SPC. In furtherance of the foregoing, all the Banks and the Administrative Agent each hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one (1) year and one (1) day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in Section 9.6(c), any SPC may (i) with notice to, but without the prior written consent of, the Borrower or Administrative Agent, and without the payment of any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Bank or to any financial institutions consented to by the Borrower and the Administrative Agent (and, subject to all of the provisions of this paragraph, such consents shall be deemed to have been granted with respect to any SPC signatory hereto on the date hereof) providing liquidity and/or credit facilities to or for the account of such SPC to support the funding or maintenance of loans, and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of liquidity and/or credit facilities to such SPC. Nothing in this Section 8.6 that would affect the rights or obligations of an SPC may be amended without the written consent of any SPC that has any Loan outstanding at the time of such amendment.

Section 8.7 Mitigation Obligations; Replacement of Banks . (a) If any Bank requests compensation under Section 8.3, or if the Borrower is required to pay any additional amount to any Bank or any Governmental Authority for the account of any Bank pursuant to Section 8.4, then such Bank shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Bank, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 8.3 or 8.4, as the case may be, in the future and (ii) would not subject such Bank to any unreimbursed cost or

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expense and would not otherwise be disadvantageous to such Bank. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Bank in connection with any such designation or assignment.

(b)    If (w) any Bank is unable to make, maintain or fund its Euro-Dollar Loans or to participate in any Letter of Credit pursuant to Section 8.2 for a period of ten (10) consecutive days, or (x) any Bank requests compensation under Section 8.3, or if the Borrower is required to pay any additional amount to any Bank or any Governmental Authority for the account of any Bank pursuant to Section 8.4, or (y) if any Bank becomes a Defaulting Lender, or (z) any Bank has refused to consent to any proposed amendment, modification, waiver, termination or consent with respect to any provision of this Agreement or any other Loan Document that, pursuant to Section 9.5, requires the consent of all Banks or of all Banks affected thereby and with respect to which Banks constituting the Required Banks have consented to such proposed amendment, modification, waiver, termination or consent, then the Borrower may, at its sole expense and effort, upon notice to such Bank and the Administrative Agent, require such Bank to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.6), all its interests, rights and obligations under this Agreement (other than any outstanding Money Market Loans held by it) to an assignee that shall assume such obligations (which assignee may be another Bank, if a Bank accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and if a Revolving Commitment is being assigned, the Fronting Banks and the Swingline Lenders), which consent shall not unreasonably be withheld or delayed (provided that no such consent shall be required for an assignment to any Bank so long as, after giving effect to such assignment, such Bank’s Revolving Commitment Percentage does not exceed 25%), (ii) such Bank shall have received payment of an amount equal to the outstanding principal of its Loans (other than Money Market Loans) and participations in Unreimbursed Obligations and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), (iii) in the case of any such assignment resulting from a claim for compensation under Section 8.3 or payments required to be made pursuant to Section 8.4, such assignment will result in a reduction in such compensation or payments and (iv) in the case of any such assignment resulting from a Bank’s refusal to consent to a proposed amendment, modification, waiver, termination or consent, the assignee shall approve the proposed amendment, modification, waiver, termination or consent. A Bank shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Bank or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

ARTICLE IX

MISCELLANEOUS
Section 9.1 Notices . (a) All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (v) in the case of the Borrower or the Administrative Agent, at its address or telecopy number set forth on the signature pages hereof, together with copies thereof, in the case of the Borrower, to Latham & Watkins LLP, 355 S. Grand Avenue,

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Los Angeles, CA 90071, Attention: Glen B. Collyer, Esq., Telephone: (213) 485-1234, Telecopy: (213) 891-8763, and in the case of the Administrative Agent, to JPMorgan Chase Bank, N.A., 500 Stanton Christiana Road, Ops 2, Newark, DE 19713, Attention: Brittany Duffy, Telephone: (302) 634-8814, Telecopy number: (302) 634-4733, with a copy to: JPMorgan Chase Bank, N.A., 251 S. Lake Avenue, Suite 900, Pasadena, CA 91101, Attention: Nadeige Dang, Telephone: (626) 432-3958, Telecopy number: (646) 861-6193, and to Morgan, Lewis & Bockius LLP, One Federal Street, Boston, Massachusetts 02110, Attention: Stephen Miklus, Esq., Telephone: (617) 951-8364, Telecopy: (617) 951-8736, (w) in the case of any Bank, at its address or telecopy number set forth on the signature pages hereof or in its Administrative Questionnaire, (x) in the case of any Swingline Lender, at its address or telecopy number set forth on Schedule 1B, (y) in the case of any Fronting Bank, at its address or telecopy number set forth on Schedule 1C or (z) in the case of any party, such other address or telecopy number as such party may hereafter specify for the purpose by notice to the Administrative Agent, the Banks and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article II or Article VIII shall not be effective until received.

(b)    Notices and other communications to the Banks hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Bank. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

(c)    Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.

(d)     Electronic Systems .

(i)    Each Credit Party agrees that the Administrative Agent may, but shall not be obligated to, make Communications (as defined below) available to the Fronting

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Banks and the other Banks by posting the Communications on Debt Domain, Intralinks, Syndtrak, ClearPar or a substantially similar Electronic System.
(ii)    Any Electronic System used by the Administrative Agent is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of such Electronic Systems and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or any Electronic System. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “ Agent Parties ”) have any liability to the Borrower or the other Credit Parties, any Bank, any Fronting Bank or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s, any Credit Party’s or the Administrative Agent’s transmission of communications through an Electronic System. “ Communications ” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Credit Party pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Administrative Agent, any Bank or any Fronting Bank by means of electronic communications pursuant to this Section, including through an Electronic System.

Section 9.2 No Waivers . No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 9.3 Expenses; Indemnification . (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent (including, without limitation, reasonable fees and disbursements of special counsel to the Administrative Agent, local counsel for the Administrative Agent, and travel, site visits, third party reports (including Appraisals), mortgage recording taxes, environmental and engineering expenses), in connection with the preparation and administration of this Agreement, the Loan Documents and the documents and instruments referred to therein, the syndication of the Loans, any waiver or consent hereunder or any amendment or modification hereof or any Default or alleged Default hereunder, (ii) the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of each Fronting Bank relating to Letters of Credit as from time to time in effect and (iii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Administrative Agent and each Bank, including, without limitation, reasonable fees and disbursements of counsel for the Administrative Agent and each Bank, in connection with the enforcement of the Loan Documents and the instruments referred to therein and such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom, including all such expenses incurred during any workout or restructuring; provided, however, that in no event shall the Borrower be required to pay for the attorneys’ fees and disbursements

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of more than one counsel to the Administrative Agent and the Banks unless there is a legal conflict of interest.

(b) The Borrower agrees to indemnify the Administrative Agent, the Fronting Banks, and each Bank, their respective Affiliates and the respective directors, officers, agents and employees of the foregoing (each an “ Indemnitee ”) and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel and settlements and settlement costs, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) and whether or not brought by the Borrower, the General Partner or any Affiliate of the Borrower, that may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, asserted against or incurred by any Indemnitee as a result of, or arising out of, or in any way related to or by reason of, (i) any of the transactions contemplated by the Loan Documents or the execution, delivery or performance of any Loan Document (including, without limitation, the Borrower’s actual or proposed use of proceeds of the Loans, whether or not in compliance with the provisions hereof), (ii) any violation by the Borrower or the Environmental Affiliates of any applicable Environmental Law, (iii) any Environmental Claim arising out of the management, use, control, ownership or operation of property or assets by the Borrower or any of the Environmental Affiliates, including, without limitation, all on-site and off-site activities involving Material of Environmental Concern, (iv) the breach of any environmental representation or warranty set forth herein, (v) the grant to the Administrative Agent and the Banks of any Lien in any property or assets of the Borrower or any stock or other equity interest in the Borrower, and (vi) the exercise by the Administrative Agent and the Banks of their rights and remedies (including, without limitation, foreclosure) under any agreements creating any such Lien (but excluding in each case, as to any Indemnitee, any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements incurred solely by reason of (y) the gross negligence or willful misconduct of such Indemnitee as finally determined by a court of competent jurisdiction or (z) any investigative, administrative or judicial proceeding imposed or asserted against any Indemnitee by any bank regulatory agency or by any equity holder of such Indemnitee). The Borrower’s obligations under this Section shall survive the termination of this Agreement and the payment of the Obligations. This Section 9.3(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

Section 9.4 Sharing of Set-Offs . In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special, time or demand, provisional or final), other than deposits held for the benefit of third parties, and any other indebtedness at any time held or owing by such Bank (including, without limitation, by branches and agencies of such Bank wherever located) to or for the credit or the account of the Borrower against and on account of the Obligations of the Borrower then due and payable to such Bank under this Agreement or under any of the other Loan Documents, including, without

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limitation, all interests in Obligations purchased by such Bank. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it or Letter of Credit participated in by it, or, in the case of a Fronting Bank, Letter of Credit issued by it, which is greater than the proportion received by any other Bank or Letter of Credit issued or participated in by such other Bank, in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks or Letter of Credit issued or participated in by such other Bank, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks or Letter of Credit issued or participated in by such other Banks shall be shared by the Banks pro rata; provided that (x) nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes or the Letters of Credit, (y) the provisions of this Section shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Bank as consideration for the assignment of or sale of a participation in any of its Loans or Commitments to any assignee or participant and (z) the provisions of this Section shall not be construed to apply to any Extension made in accordance with Section 2.19. The Borrower agrees, to the fullest extent that it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation.

Section 9.5 Amendments and Waivers . Any provision of this Agreement (including any of the financial covenants given by the Borrower pursuant to Section 5.8), the Notes, the Letters of Credit or other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks, (and, if the rights or duties of the Administrative Agent, the Fronting Banks or the Swingline Lenders are affected thereby (including pursuant to Section 2.16, Section 2.18, Article VII or Section 9.8), by the Administrative Agent, the Fronting Banks or the Swingline Lenders, as applicable) (and, if the rights or duties of only a specific Facility are affected thereby or if such amendment or waiver adversely affects the rights of a specific Facility in a manner that is different than such amendment or waiver effects the other Facility, the Majority Facility Banks for such Facility); provided that no such amendment or waiver shall (a) increase or decrease the Commitment of any Bank (except for any reduction or termination pursuant to Sections 2.9, 2.11 or 6.2), unless signed by such Bank, (b) reduce the principal of or rate of interest on any Loan or any fees specified herein, unless signed by each Bank affected thereby, (c) postpone the date fixed for any payment of principal of or interest on any Loan, or the expiration date of any Letter of Credit beyond the Revolving Credit Maturity Date, or any fees hereunder or for any reduction or termination of any Commitment, unless signed by each Bank affected thereby (notwithstanding the foregoing, however, it is agreed that only the consent of the extending Banks shall be required for an Extension in accordance with Section 2.19), (d) release the Guaranty or otherwise release any other collateral, unless signed by each Bank affected thereby, (e) subordinate the Loans to any other Debt, unless signed by each Bank affected thereby, (f) change the percentage of the Commitments or of the aggregate unpaid principal amount of the

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Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section 9.5 or any other provision of this Agreement, unless signed by each Bank affected thereby, (g) reduce the percentage specified in the definition of (i) Majority Facility Banks with respect to any Facility, unless signed by all of the Banks under such Facility, (iii) Required Revolving Credit Banks with respect to the Revolving Credit Facility, unless signed by all of the Revolving Credit Banks or (iii) Required Banks unless signed by all of the Banks, (h) change Section 2.12(c) or Section 9.4 in a manner that would alter the pro rata sharing of payments required thereby, unless signed by each Bank affected thereby or (i) change this Section 9.5 unless signed by each Bank affected thereby. Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in writing and signed by the Designating Lender on behalf of its Designated Lender affected thereby, (x) subject such Designated Lender to any additional obligations, (y) reduce the principal of, interest on, or other amounts due with respect to, the Designated Lender Note made payable to such Designated Lender, or (z) postpone any date fixed for any payment of principal of, or interest on, or other amounts due with respect to the Designated Lender Note made payable to the Designated Lender.

Section 9.6 Successors and Assigns . (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement or the other Loan Documents without the prior written consent of all Banks (and any attempted assignment or transfer by the Borrower without such consent shall be void).

(b) Any Bank may at any time grant to one or more banks or other entities, other than the Borrower and its Affiliates (each a “ Participant ”) participating interests in any or all of its Commitments or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (a), (b), (c) or (d) of Section 9.5 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest (subject to the requirements and limitations therein, including the requirements under Section 8.4(d)(iii) (it being understood that the documentation required under Section 8.4(d)(iii) shall be delivered to the participating Bank)) to the same extent as if it were a Bank and had acquired its interest by assignment pursuant to paragraph (c) of this Section; provided that such Participant agrees to be subject to the provisions of Sections 8.7 as if it were an assignee under paragraph (c) of this Section. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). Each Bank that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the

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principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “ Participant Register ”); provided that no Bank shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Bank shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(c) Any Bank may at any time assign to one or more Eligible Assignees (each an “ Assignee ”) all, or a proportionate part of all, of its rights and obligations under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit D attached hereto executed by such Assignee and such transferor Bank, with (and subject to) the prior written consent of (x) the Administrative Agent, which consent shall not be unreasonably withheld or delayed, provided that no consent of the Administrative Agent shall be required for an assignment of (A) any Revolving Commitment to an assignee that is a Revolving Credit Bank (other than a Defaulting Lender) immediately prior to giving effect to such assignment, and (B) all or any portion of a Term Loan or a Term Loan Commitment to a Bank, an Affiliate of a Bank or an Approved Fund, (y) provided no Event of Default shall have occurred and be continuing, the Borrower, which consent shall not be unreasonably withheld or delayed, provided further, however, that no such consent by the Borrower shall be required in the case of an assignment to another Bank, an Affiliate of a Bank or an Approved Fund, and the Borrower shall be deemed to have consented to an assignment unless it shall have objected thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof and (z) in the case of an assignment of a Revolving Commitment, each Swingline Lender and each Fronting Bank, which consent will not be unreasonably withheld or delayed. Notwithstanding anything to the contrary contained herein, no Bank may assign or participate its interest to (x) the Borrower and its Affiliates, (y) a natural person or (z) a Defaulting Lender. Except in the case of an assignment to a Revolving Credit Bank or an Affiliate of a Revolving Credit Bank or an assignment of the entire remaining amount of the assigning Revolving Credit Bank's Revolving Commitments, the amount of the Revolving Commitments or Revolving Loans of the assigning Revolving Credit Bank subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing. Except in the case of an assignment to a Term Loan Bank or an Affiliate of a Term Loan Bank or an assignment of the entire remaining amount of the assigning Term Loan Bank's Term Loan Commitments or if the Term Loan Commitment Period has ended, such Term Loan Bank’s Term Loans, the amount of the Term Loan Commitments or Term Loans of the assigning Term Loan Bank subject to each such assignment (determined as of the date the Assignment and

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Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Bank's rights and obligations under this Agreement (provided that this clause shall not be construed to prohibit the assignment of a proportionate part of the assigning Bank’s rights and obligations in respect of only one Facility). The assignee, if it shall not be a Bank, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon execution and delivery (and acceptance and recording in the Register by the Administrative Agent) of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note or Notes are issued to the Assignee. In connection with any such assignment (except for an assignment by a Bank to its Affiliate), the transferor Bank shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500. The Assignee shall deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.4.

(d) Any Bank that holds Revolving Commitments (each, a “ Designating Lender ”) may at any time designate one Designated Lender to fund Money Market Loans on behalf of such Designating Lender subject to the terms of this Section 9.6(d) and the provisions in Section 9.6(b) and (c) shall not apply to such designation. No Bank may designate more than one (1) Designated Lender. The parties to each such designation shall execute and deliver to the Administrative Agent for its acceptance a Designation Agreement. Upon such receipt of an appropriately completed Designation Agreement executed by a Designating Lender and a designee representing that it is a Designated Lender, the Administrative Agent will accept such Designation Agreement and will give prompt notice thereof to the Borrower, whereupon, (i) the Borrower shall execute and deliver to the Designating Bank a Designated Lender Note payable to the Designated Lender, (ii) from and after the effective date specified in the Designation Agreement, the Designated Lender shall become a party to this Agreement with a right (subject to the provisions of Section 2.3(b)) to make Money Market Loans on behalf of its Designating Lender pursuant to Section 2.3 after the Borrower has accepted a Money Market Loan (or portion thereof) of the Designating Lender, and (iii) the Designated Lender shall not be required to make payments with respect to any obligations in this Agreement except to the extent of excess cash flow of such Designated Lender which is not otherwise required to repay obligations of such Designated Lender which are then due and payable; provided, however, that regardless of such designation and assumption by the Designated Lender, the Designating Lender shall be and remain obligated to the Borrower and the Banks for each and every of the obligations of the Designating Lender and its related Designated Lender with respect to this Agreement, including, without limitation, any indemnification obligations under Section 7.6 hereof and any sums otherwise payable to the Borrower by the Designated Lender. Each Designating Lender shall serve as the administrative agent of the Designated Lender and shall on behalf of, and to the

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exclusion of, the Designated Lender: (i) receive any and all payments made for the benefit of the Designated Lender and (ii) give and receive all communications and notices and take all actions hereunder, including, without limitation, votes, approvals, waivers, consents and amendments under or relating to this Agreement and the other Loan Documents. Any such notice, communication, vote, approval, waiver, consent or amendment shall be signed by the Designating Lender as administrative agent for the Designated Lender and shall not be signed by the Designated Lender on its own behalf and shall be binding upon the Designated Lender to the same extent as if signed by the Designated Lender on its own behalf. The Borrower, the Administrative Agent, and the Banks may rely thereon without any requirement that the Designated Lender sign or acknowledge the same. No Designated Lender may assign or transfer all or any portion of its interest hereunder or under any other Loan Document, other than assignments to the Designating Lender which originally designated such Designated Lender or otherwise in accordance with the provisions of Section 9.6(b) and (c).

(e) Any Bank may at any time assign or pledge all or any portion of its rights under this Agreement and its Notes and the Letter(s) of Credit participated in by such Bank or, in the case of a Fronting Bank, issued by it, to secure obligations of such Bank, including any pledge to a Federal Reserve Bank or other central bank having jurisdiction over such Bank. No such assignment shall release the transferor Bank from its obligations hereunder or substitute any such assignee or pledgee for such Bank as a party hereto.

(f) No Assignee, Participant or other transferee of any Bank’s rights shall be entitled to receive any greater payment under Section 8.3 or 8.4 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower’s prior written consent or, with regard to Participations, to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable interest.

(g) The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain a register for the recordation of the names and addresses of the Banks, and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Bank pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Banks shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Bank, at any reasonable time and from time to time upon reasonable prior notice.

Section 9.7 USA Patriot Act . Each Bank hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Bank to identify the Borrower in accordance with the Act.

Section 9.8 Defaulting Lenders . Notwithstanding any provision of this Agreement to the contrary, if any Bank becomes a Defaulting Lender, then the following provisions shall apply for so long as such Bank is a Defaulting Lender:


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(a) fees shall cease to accrue on the Commitment(s) of such Defaulting Lender pursuant to Section 2.8;

(b) the Revolving Commitments, Term Loan Commitments and Term Loans of such Defaulting Lender shall not be included in determining whether all Banks or the Required Banks have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 9.5, except that the Defaulting Lender’s consent shall be required in connection with any increase in such Defaulting Lender’s Commitment(s) pursuant to Section 9.5(a), any amendment pursuant to Section 9.5(b) affecting its Loans or pursuant to Section 9.5(z)), provided that any waiver, amendment or modification requiring the consent of all Banks or each affected Bank which affects such Defaulting Lender differently than other affected Banks shall require the consent of such Defaulting Lender;

(c) if any Swingline Loans or Letters of Credit exist at the time a Revolving Credit Bank becomes a Defaulting Lender then:

(i) all or any part of such liability, if any, with respect to Swingline Loans and Letters of Credit shall be reallocated among the non-Defaulting Lenders in accordance with their respective Revolving Commitment Percentages but only to the extent (x) the sum of all non-Defaulting Lenders’ Obligations under the Revolving Credit Facility plus such Defaulting Lender’s Revolving Commitment Percentage of Swingline Loans and Letter of Credit Usage does not exceed the total of all non-Defaulting Lenders’ Revolving Commitments (it being understood that under no circumstance shall any such Revolving Credit Bank at any time be liable for any amounts in excess of its Revolving Commitment) and (y) the conditions set forth in Section 3.2(d) and (e) are satisfied at the time of such reallocation (and unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time); and

(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within five (5) Domestic Business Days following notice by the Administrative Agent (x) first, prepay such Defaulting Lender’s Revolving Commitment Percentage of the Swingline Loans and (y) second, cash collateralize for the benefit of the Fronting Banks only the Borrower’s obligations corresponding to such Defaulting Lender’s Revolving Commitment Percentage of the Letter of Credit Usage (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 6.4(a) for so long as such Letters of Credit are outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s Revolving Commitment Percentage of the Letter of Credit Usage pursuant to this Section 9.8(c), the Borrower shall not be required to pay any fees to such Defaulting Lender with respect to such Defaulting Lender’s Revolving Commitment Percentage of the Letter of Credit Usage during the period such Defaulting Lender’s Revolving Commitment Percentage of the Letter of Credit Usage is cash collateralized;


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(iv) if the Revolving Commitment Percentage of the non-Defaulting Lenders with respect to Letter of Credit Usage is reallocated pursuant to this Section 9.8(c), then the fees payable to the Banks pursuant to this Agreement shall be adjusted in accordance with such non-Defaulting Lenders’ Revolving Commitment Percentages; or

(v) if any Defaulting Lender’s Revolving Commitment Percentage of Letter of Credit Usage is neither cash collateralized nor reallocated pursuant to clauses (i) or (ii) above, then, without prejudice to any rights or remedies of any Fronting Bank or any other Bank hereunder, all Facility Fees that otherwise would have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lender’s Commitment that was utilized by such Revolving Commitment Percentage of Letter of Credit Usage) and Letter of Credit Fees payable under Section 2.8 with respect to such Defaulting Lender’s Revolving Commitment Percentage of the Letter of Credit Usage shall be payable to the applicable Fronting Bank until and to the extent that such Revolving Commitment Percentage of Letter of Credit Usage is reallocated and/or cash collateralized; and

(d) if such Bank is a Revolving Credit Bank, so long as such Bank is a Defaulting Lender, the Swingline Lenders shall not be required to fund any Swingline Loan and the Fronting Banks shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure and the then Defaulting Lender’s then outstanding Revolving Commitment Percentage of the Letter of Credit Usage will be 100% covered by the Revolving Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 9.8(c), and participating interests in any such newly issued or increased Letter of Credit or newly made Swingline Loan shall be allocated among non-Defaulting Lenders in a manner consistent with Section 9.8(c)(i) (and Defaulting Lender shall not participate therein).

If (i) a Bankruptcy Event or a Bail-In Action with respect to a Parent of any Bank shall occur following the date hereof and for so long as such event shall continue or (ii) any Swingline Lender or any Fronting Bank has a good faith belief that any Revolving Credit Bank has defaulted in fulfilling its obligations under one or more other agreements in which such Revolving Credit Bank commits to extend credit, no Swingline Lender shall be required to fund any Swingline Loan and no Fronting Bank shall be required to issue, amend or increase any Letter of Credit, unless a Swingline Lender or a Fronting Bank, as the case may be, shall have entered into arrangements with the Borrower or such Revolving Credit Bank, satisfactory to such Swingline Lender or such Fronting Bank, as the case may be, to defease any risk to it in respect of such Bank hereunder.
In the event that the Administrative Agent, the Borrower, and if the Defaulting Lender is a Revolving Credit Bank, the Fronting Banks and the Swingline Lenders each agrees that a Defaulting Lender has adequately remedied all matters that caused such Bank to be a Defaulting Lender, then the Revolving Commitment Percentages of the Banks with respect to Swingline Loans and Letters of Credit shall be readjusted to reflect the inclusion of such Revolving Credit Bank’s Revolving Commitment and on such date such Revolving Credit Bank shall purchase at par such of the Revolving Loans of the other Banks (other than Money Market Loans and Swingline Loans) as the Administrative Agent shall determine may be necessary in

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order for such Revolving Credit Bank to hold such Revolving Loans in accordance with its Revolving Commitment Percentage.
Section 9.9 Governing Law; Submission to Jurisdiction .

(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW THAT WOULD CAUSE THE APPLICATION OF ANY LAW OTHER THAN THE STATE OF NEW YORK).

(b) Any legal action or proceeding with respect to this Agreement or any other Loan Document and any action for enforcement of any judgment in respect thereof may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Borrower hereby accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and appellate courts from any thereof. The Borrower irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the hand delivery, or mailing of copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address set forth below. The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Loan Document brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of the Administrative Agent, any Bank or any holder of a Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction.

Section 9.10 Marshaling; Recapture . Neither the Administrative Agent nor any Bank shall be under any obligation to marshal any assets in favor of the Borrower or any other party or against or in payment of any or all of the Obligations. To the extent any Bank receives any payment by or on behalf of the Borrower, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to the Borrower or its estate, trustee, receiver, custodian or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the Obligation or part thereof which has been paid, reduced or satisfied by the amount so repaid shall be reinstated by the amount so repaid and shall be included within the liabilities of the Borrower to such Bank as of the date such initial payment, reduction or satisfaction occurred.

Section 9.11 Counterparts; Integration; Effectiveness . This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This

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Agreement shall become effective upon receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy, emailed pdf, or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 9.12 WAIVER OF JURY TRIAL . EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE BANKS, THE SWINGLINE LENDERS AND THE FRONTING BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 9.13 Survival . All indemnities set forth herein shall survive the execution and delivery of this Agreement and the other Loan Documents and the making and repayment of the Loans hereunder.

Section 9.14 Domicile of Loans . Subject to the provisions of Article VIII, each Bank may transfer and carry its Loans at, to or for the account of any domestic or foreign branch office, subsidiary or Affiliate of such Bank.

Section 9.15 Limitation of Liability . No claim may be made by the Borrower or any other Person against the Administrative Agent or any Bank or the Affiliates, directors, officers, employees, attorneys or agent of any of them for any special, indirect consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement or by the other Loan Documents, or any act, omission or event occurring in connection therewith; and the Borrower hereby waives, releases and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

Section 9.16 No Bankruptcy Proceedings . Each of the Borrower, the Banks, and the Administrative Agent hereby agrees that it will not institute against any Designated Lender or join any other Person in instituting against any Designated Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, until the later to occur of (i) one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designated Lender and (ii) the Maturity Date.

Section 9.17 Optional Increase in Commitments . (a) At any time prior to the Maturity Date, provided no Event of Default shall have occurred and then be continuing, the Borrower may, elect to request (A) an increase to the existing Revolving Commitments (any

110



such increase, the “ New Revolving Commitments ”) and/or (B) the establishment of one or more new term loan commitments (the “ New Term Loan Commitments ”, together with the New Revolving Commitments, the “ Incremental Commitments ”), by up to an aggregate amount not to exceed $600,000,000 for all Incremental Commitments (so that after giving effect to all Incremental Commitments, the sum of the Revolving Commitments plus the principal amount of Term Loans made hereunder and pursuant to Section 2.1 plus the unused amount of Term Loan Commitments does not exceed $1,500,000,000). Each such notice shall specify the date (each, an “ Increased Amount Date ”) on which the Borrower proposes that such Incremental Commitments shall be effective, which shall be a date not less than ten (10) Business Days after the date on which such notice is delivered to the Administrative Agent. Such Incremental Commitments shall be made either by designating a Qualified Institution not theretofore a Bank to become a Bank (such designation to be effective only with the prior written consent of the Administrative Agent, which consent will not be unreasonably withheld) and/or by agreeing with an existing Bank or Banks that such Bank’s Commitment shall be increased, it being understood that no such existing Bank or Banks shall have any obligation to so increase its Commitment). Any arranger for the Incremental Commitments selected by the Borrower shall use commercially reasonable efforts, with the assistance of the Borrower, to arrange a syndicate of Banks or other Persons that are Qualified Institutions willing to hold the requested Incremental Commitments; provided that (x) any Incremental Commitments on any Increased Amount Date shall be in the minimum aggregate amount of $25,000,000, (y) any Bank approached to provide all or a portion of the Incremental Commitments may elect or decline, in its sole discretion, to provide an Incremental Commitment; provided that the Banks will first be afforded the opportunity to provide the Incremental Commitments on a pro rata basis, and if any Bank so approached fails to respond within such ten (10) Business Day period after its receipt of such request, such Bank shall be deemed to have declined to provide such Incremental Commitments, and (z) any Bank or other Person that is a Qualified Institution (each, a “ New Revolving Credit Bank ” or “ New Term Loan Bank ,” as applicable) to whom any portion of such Incremental Commitment shall be allocated shall be subject to the approval of the Borrower and the Administrative Agent (such approval not to be unreasonably withheld or delayed), and, in the case of a New Revolving Commitment, the Fronting Banks and the Swingline Lenders (each of which approvals shall not be unreasonably withheld), unless such New Revolving Credit Bank is an existing Revolving Credit Bank (other than a Defaulting Lender) with a Revolving Commitment at such time or such New Term Loan Bank is an existing Term Loan Bank or an Affiliate of an existing Bank. Upon execution and delivery by the Borrower and such Bank or other financial institution of an instrument in form reasonably satisfactory to the Administrative Agent, such existing Bank shall have a Commitment as therein set forth or such Qualified Institution shall become a Bank with a Commitment as therein set forth and all the rights and obligations of a Bank with such a Commitment hereunder; provided that :

(i) the Borrower shall provide prompt notice of such increase to the Administrative Agent, who shall promptly notify the Banks; and

(ii) the amount of such Incremental Increase, together with all other Incremental Increases in the aggregate amount of the Commitments pursuant to this Section 9.17 since the date of this Agreement, does not cause the sum of (x) the Term Loan Amount and (y) the Revolving Loan Amount to exceed $1,500,000,000.



111



(b) Upon any Incremental Commitments pursuant to this Section 9.17, within five (5) Business Days (in the case of any Base Rate Loans then outstanding) or at the end of the then current Interest Period with respect thereto (in the case of any Euro-Dollar Loans then outstanding), as applicable, each Bank’s Commitment Percentage shall be recalculated to reflect such Incremental Commitments and the outstanding principal balance of the Loans shall be reallocated among the Banks such that the outstanding principal amount of Loans owed to each Bank shall be equal to such Bank’s Commitment Percentage (as recalculated) thereof. All payments, repayments and other disbursements of funds by the Administrative Agent to Banks shall thereupon and, at all times thereafter be made in accordance with each Bank’s recalculated Commitment Percentage. For purposes hereof, “ Qualified Institution ” means a Bank, or one or more banks, finance companies, insurance or other financial institutions which (i) (A) has (or, in the case of a bank which is a subsidiary, such bank’s parent has) a rating of its senior debt obligations of not less than Baa-1 by Moody’s or a comparable rating by a rating agency acceptable to the Administrative Agent and (B) has total assets in excess of Ten Billion Dollars ($10,000,000,000), or (ii) is reasonably acceptable to the Administrative Agent.

(c) The terms and provisions of any New Revolving Commitments shall be identical to the existing Revolving Commitments. The terms and provisions of any New Term Loan Commitments and any New Term Loans shall (a) provide that the maturity date of any New Term Loan that is a separate tranche shall be no earlier than the Term Loan Maturity Date and the weighted average life to maturity of such New Term Loans shall not be shorter than the weighted average life to maturity of the existing Term Loans, (b) share ratably in any prepayments of the existing Term Loan Facility, unless the Borrower and the New Term Loan Banks in respect of such New Term Loans elect lesser payments and (c) otherwise be identical to the existing Term Loans or reasonably acceptable to the Administrative Agent and each New Term Loan Bank.

(d) On any Increased Amount Date on which New Revolving Commitments are effected, subject to the satisfaction of the foregoing terms and conditions, (i) each of the Revolving Credit Banks shall assign to each of the New Revolving Credit Banks, and each of the New Revolving Credit Banks shall purchase from each of the Revolving Credit Banks, at the principal amount thereof (together with accrued interest), such interests in the Revolving Loans outstanding on such Increased Amount Date as shall be necessary in order that, after giving effect to all such assignments and purchases, such Revolving Loans will be held by existing Revolving Credit Banks and New Revolving Credit Banks ratably in accordance with their Revolving Commitments after giving effect to the addition of such New Revolving Commitments to the Revolving Commitments, (ii) each New Revolving Commitment shall be deemed for all purposes a Revolving Commitment and each Loan made thereunder shall be deemed, for all purposes, a Revolving Loan and (iii) each New Revolving Credit Bank shall become a Revolving Credit Bank with respect to its New Revolving Commitment and all matters relating thereto.

(e) On any Increased Amount Date on which any New Term Loan Commitments are effected, subject to the satisfaction of the foregoing terms and conditions, (i) each New Term Loan Bank shall make a Term Loan to the Borrower (a “ New Term Loan ”) in an amount equal to its New Term Loan Commitment, and (ii) each New Term Loan Bank shall

112



become a Bank hereunder with respect to the New Term Loan Commitment and the New Term Loans made pursuant thereto.

(f) The Administrative Agent shall notify the Banks promptly upon receipt of the Borrower’s notice of each Increased Amount Date and in respect thereof (i) the New Revolving Commitments and the New Revolving Credit Banks or the New Term Loan Commitments and the New Term Loan Banks, as applicable, and (ii) in the case of each notice to any Revolving Credit Bank, the respective interests in such Revolving Credit Bank’s Revolving Loans, in each case subject to the assignments contemplated by this paragraph.

(g) The effectiveness of any Incremental Commitments and the availability of any Borrowings under any such Incremental Commitments shall be subject to the satisfaction of the following conditions precedent: (x) after giving pro forma effect to such Incremental Commitments and Borrowings and the use of proceeds thereof, (i) no Default or Event of Default has occurred and is continuing and (ii) as of the last day of the most recent calendar quarter for which financial statements have been delivered pursuant to Section 5.1, the Borrower would have been in compliance with the financial covenants set forth in Section 5.8; (y) the representations and warranties made or deemed made by the Borrower in any Loan Document shall be true and correct in all material respects on the effective date of such Incremental Commitments except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date); and (z) the Administrative Agent shall have received each of the following, in form and substance reasonably satisfactory to the Administrative Agent: (i) if not previously delivered to the Administrative Agent, copies certified by the Secretary or Assistant Secretary of all corporate or other necessary action taken by the Borrower to authorize such Incremental Commitments; and (ii) a customary opinion of counsel to the Borrower (including in-house opinions in lieu of opinions of outside counsel, which may be in substantially the same form as delivered on the Closing Date), and addressed to the Administrative Agent and the applicable Banks, and (iii) if requested by any Bank, new Notes executed by the Borrower, payable to any new Bank, and replacement Notes executed by the Borrower, payable to any existing Bank.

(h) The Incremental Commitments shall be evidenced pursuant to one or more Additional Credit Extension Amendments executed and delivered by the Borrower, the New Revolving Credit Banks or New Term Loan Banks, as applicable, and the Administrative Agent, and each of which shall be recorded in the Register. Each Additional Credit Extension Amendment may, without the consent of any other Banks, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the Administrative Agent, to effect the provisions of this Section 9.17.

Section 9.18 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.


113



Section 9.19 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the " Charges "), shall exceed the maximum lawful rate (the " Maximum Rate ") which may be contracted for, charged, taken, received or reserved by the Bank holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Bank in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Bank.

Section 9.20 Transitional Arrangements .

(a) Existing Credit Agreement Superseded . This Agreement shall supersede the Existing Credit Agreement in its entirety, except as provided in this Section 9.20 . On the Closing Date, (i) the Revolving Loans outstanding under the Existing Credit Agreement shall become Revolving Loans hereunder, (ii) the rights and obligations of the parties under the Existing Credit Agreement and the “Notes” defined therein shall be subsumed within and be governed by this Agreement and the Notes; provided however , that for purposes of this clause (ii) any of the “Obligations” (as defined in the Existing Credit Agreement) outstanding under the Existing Credit Agreement shall, for purposes of this Agreement, be Obligations hereunder, (iii) this Agreement shall not in any way release or impair the rights, duties or Obligations created pursuant to the Existing Credit Agreement or any other Loan Document or affect the relative priorities thereof, in each case to the extent in force and effect thereunder as of the Closing Date, except as modified hereby or by documents, instruments and agreements executed and delivered in connection herewith, and all of such rights, duties and Obligations are assumed, ratified and affirmed by the Borrower; (iv) the Obligations incurred under the Existing Credit Agreement shall, to the extent outstanding on the Closing Date, continue outstanding under this Agreement and shall not be deemed to be paid, released, discharged or otherwise satisfied by the execution of this Agreement, and this Agreement shall not constitute a refinancing, substitution or novation of such Obligations or any of the other rights, duties and obligations of the parties hereunder; and (v) the execution, delivery and effectiveness of this Agreement shall not operate as a waiver of any right, power or remedy of Lenders or the Administrative Agent under the Existing Credit Agreement, nor constitute a waiver of any covenant, agreement or obligation under the Existing Credit Agreement, except to the extent that any such covenant, agreement or obligation is no longer set forth herein or is modified hereby. The Lenders’ interests in such Obligations, and participations in such Letters of Credit, shall be reallocated on the Closing Date in accordance with each Lender's applicable Revolving Commitment Percentages.

(b) Interest and Fees under Existing Credit Agreement . All interest and all commitment, facility and other fees and expenses owing or accruing under or in respect of the Existing Credit Agreement shall be calculated as of the Closing Date (prorated in the case of any fractional periods), and shall be paid on the Closing Date in accordance with the method specified in the Existing Credit Agreement as if such agreements were still in effect.


114



Section 9.21 Confidentiality . Each of the Administrative Agent, the Fronting Banks and the Banks agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and such Persons shall either agree or have a legal obligation to keep such Information confidential), (b) to the extent requested by any regulatory authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the prior written consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, any Fronting Bank or any Bank on a non-confidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, any Fronting Bank or any Bank on a non-confidential basis prior to disclosure by the Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Section 9.22 No Fiduciary Duty, etc. The Borrower acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that no Credit Party will have any obligations except those obligations expressly set forth herein and in the other Loan Documents and each Credit Party is acting solely in the capacity of an arm’s length contractual counterparty to the Borrower with respect to the Loan Documents and the transaction contemplated therein and not as a financial advisor or a fiduciary to, or an agent of, the Borrower or any other person. The Borrower agrees that it will not assert any claim against any Credit Party based on an alleged breach of fiduciary duty by such Credit Party in connection with this Agreement and the transactions contemplated hereby. Additionally, the Borrower acknowledges and agrees that no Credit Party is advising the Borrower as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction. The Borrower shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and the Credit Parties shall have no responsibility or liability to the Borrower with respect thereto.

The Borrower further acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that each Credit Party is a full service securities or banking firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, any Credit Party may provide investment banking and other financial services to, and/or acquire, hold or sell, for its own accounts and the

115



accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of, the Borrower and other companies with which the Borrower may have commercial or other relationships. With respect to any securities and/or financial instruments so held by any Credit Party or any of its customers, all rights in respect of such securities and financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole discretion, unless such other discretion is specified in this Agreement.
In addition, the Borrower acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that each Credit Party and its affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which the Borrower may have conflicting interests regarding the transactions described herein and otherwise. No Credit Party will use confidential information obtained from the Borrower by virtue of the transactions contemplated by the Loan Documents or its other relationships with the Borrower in connection with the performance by such Credit Party of services for other companies, and no Credit Party will furnish any such information to other companies. The Borrower also acknowledge that no Credit Party has any obligation to use in connection with the transactions contemplated by the Loan Documents, or to furnish to the Borrower, confidential information obtained from other companies.
Section 9.23 Acknowledgement and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(b) the effects of any Bail-In Action on any such liability, including, if applicable:

(i) a reduction in full or in part or cancellation of any such liability;

(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

[Signature pages to follow]



116



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
BORROWER:
 
 
KILROY REALTY, L.P., a Delaware limited
partnership
 
 
 
 
By:
Kilroy Realty Corporation, a Maryland
corporation, its general partner
 
 
 
 
By:
/s/ Tyler H. Rose
 
 
Name: Tyler H. Rose
Title:   Executive Vice President, Chief Financial Officer and Secretary
 
 
 
 
By:
/s/ Michelle Ngo
 
 
Name: Michelle Ngo
Title:   Senior Vice President and Treasurer
 
 
 
 
 
Kilroy Realty, L.P.
 
 
12200 West Olympic Boulevard, Suite 200
 
 
Los Angeles, California 90064
 
 
Attn: Tyler Rose and Michelle Ngo
 
 
Telephone number: (310) 481-8400
 
 
Telecopy number: (310) 481-6580



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

ADMINISTRATIVE AGENT AND BANK:


 
 
JP MORGAN CHASE BANK, N.A., As
Administrative Agent and as a Bank
 
 
 
 
By:
/s/ Nadeige Dang
 
 
Name: Nadeige Dang
Title:   Vice President
 
 
 
 
 
JPMorgan Chase Bank, N.A.
 
 
251 S. Lake Avenue, Suite 900
 
 
Pasadena, CA 91101
 
 
Attn: Nadeige Dang
 
 
Telephone: (626) 432-3958
 
 
Telecopy number: (646) 861-6193
 
 
 
 
 
Domestic and Euro-Dollar
Lending Office:
 
 
 
 
 
JPMorgan Chase Bank, N.A.
 
 
500 Stanton Christiana Road, Ops 2, 3rd Floor
 
 
Newark, DE 19713
 
 
Attn: Loan and Agency Services
 
 
Telephone: (302) 634-8814
 
 
Telecopy number: (302) 634-4733




[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

SYNDICATION AGENT AND BANK:


 
 
BANK OF AMERICA, N.A.
 
 
 
 
By:
/s/ Helen Chan
 
 
Name: Helen Chan
Title:   Vice President



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
WELLS FARGO BANK, NATIONAL
ASSOCIATION
 
 
 
 
By:
/s/ Kevin A. Stacker
 
 
Name: Kevin A. Stacker
Title:   Senior Vice President



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
PNC BANK, NATIONAL ASSOCIATION
 
 
 
 
By:
/s/ Nicolas Zitelli
 
 
Name: Nicolas Zitelli
Title:   Senior Vice President




[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
U.S. BANK NATIONAL ASSOCIATION
 
 
 
 
By:
/s/ Patrick J. Brown
 
 
Name: Patrick J. Brown
Title:   Vice President



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
BANK OF THE WEST, a California banking
corporation
 
 
 
 
By:
/s/ Sara J. Burns
 
 
Name: Sara J. Burns
Title:   Vice President
 
 
 
 
By:
/s/ Benjamin Arroyo
 
 
Name: Benjamin Arroyo
Title:   Vice President


[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
BARCLAYS BANK PLC
 
 
 
 
By:
/s/ Craig Malloy
 
 
Name: Craig Malloy
Title:   Director



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
COMPASS BANK
 
 
 
 
By:
/s/ Brian Tuerff
 
 
Name: Brian Tuerff
Title:   Senior Vice President



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
MUFG UNION BANK, N.A.
 
 
 
 
By:
/s/ Katherine Davidson
 
 
Name: Katherine Davidson
Title:   Director



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
ROYAL BANK OF CANADA
 
 
 
 
By:
/s/ Dan LePage
 
 
Name: Dan LePage
Title:   Authorized Signatory



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

CO-DOCUMENTATION AGENT AND BANK:
 
 
SUMITOMO MISUI BANKING
CORPORATION
 
 
 
 
By:
/s/ Hideo Notsu
 
 
Name: Hideo Notsu
Title:   Managing Director



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

 
 
CITIBANK, N.A.
 
 
 
 
By:
/s/ John C. Rowland
 
 
Name: John C. Rowland
Title:   Vice President
 
 
 



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

 
 
COMERICA BANK
 
 
 
 
By:
/s/ Charles Weddell
 
 
Name: Charles Weddell
Title:   Vice President
 
 
 



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

 
 
KEYBANK NATIONAL ASSOCIATION
 
 
 
 
By:
/s/ Michael P. Szuba
 
 
Name: Michael P. Szuba
Title:   Vice President
 
 
 


[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

 
 
THE BANK OF NOVA SCOTIA
 
 
 
 
By:
/s/ Chad Hale
 
 
Name: Chad Hale
Title:   Director & Execution Head, REGAL
 
 
 



[Signature Page - Second Amended and Restated Credit Agreement (Kilroy)]

EXHIBIT A-1
REVOLVING NOTE
$____________
 
 
 
New York, New York
 
 
 
 
[Date]

For value received, KILROY REALTY, L.P., a Delaware limited partnership (the “ Borrower ”) promises to pay to _______________ (the “ Revolving Credit Bank ”), for the account of its Applicable Lending Office, the principal sum of ________________ DOLLARS ($_________) or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the Revolving Credit Bank to the Borrower pursuant to the Credit Agreement referred to below on the Revolving Credit Maturity Date. The Borrower promises to pay interest on the unpaid principal amount of each such Revolving Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Administrative Agent under the Credit Agreement (as defined below).
All Revolving Loans made by the Revolving Credit Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Revolving Credit Bank and, if the Revolving Credit Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Revolving Loan then outstanding may be endorsed by the Revolving Credit Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Revolving Credit Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.
This Revolving Note is one of the Notes referred to in the Second Amended and Restated Credit Agreement, dated as of July 24, 2017, among the Borrower, the Banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Joint Lead Arranger, Joint Bookrunner and as Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and Joint Bookrunner, Wells Fargo Securities, LLC, as Joint Lead Arranger and Joint Bookrunner, PNC Capital Markets LLC, as Joint Lead Arranger, U.S. Bank National Association, as Joint Lead Arranger, and Bank of America, N.A., as Syndication Agent (as the same may be amended from time to time, the “ Credit Agreement ”).

[Signature Page to Follow]


A-2- 1

Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof.
KILROY REALTY, L.P., a Delaware limited partnership
By:    Kilroy Realty Corporation, a Maryland corporation, its general partner
By:
 
 
Name:
 
Title:
By:
 
 
Name:
 
Title:


A-1- 2

Note (cont’d)
REVOLVING LOANS AND PAYMENTS OF PRINCIPAL

Date
Amount of Revolving Loan
Type of Revolving Loan
Amount of Principal Repaid
Maturity Date
Notation Made By
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


A-1- 3

EXHIBIT A-2
TERM NOTE
$____________
 
 
 
New York, New York
 
 
 
 
[Date]

For value received, KILROY REALTY, L.P., a Delaware limited partnership (the “ Borrower ”) promises to pay to _______________ (the “ Term Loan Bank ”), for the account of its Applicable Lending Office, the principal sum of _______________ DOLLARS ($________) or, if less, the aggregate unpaid principal amount of all Term Loans made by the Term Loan Bank to the Borrower pursuant to the Credit Agreement referred to below on the Term Loan Maturity Date. The Borrower promises to pay interest on the unpaid principal amount of each such Term Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Administrative Agent under the Credit Agreement (as defined below).
All Term Loans made by the Term Loan Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Term Loan Bank and, if the Term Loan Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Term Loan then outstanding may be endorsed by the Term Loan Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Term Loan Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.
This Term Note is one of the Notes referred to in the Second Amended and Restated Credit Agreement, dated as of July 24, 2017, among the Borrower, the Banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Joint Lead Arranger, Joint Bookrunner and as Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and Joint Bookrunner, Wells Fargo Securities, LLC, as Joint Lead Arranger and Joint Bookrunner, PNC Capital Markets LLC, as Joint Lead Arranger, U.S. Bank National Association, as Joint Lead Arranger, and Bank of America, N.A., as Syndication Agent (as the same may be amended from time to time, the “ Credit Agreement ”).

[Signature Page to Follow]


A-2- 1

Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof.
KILROY REALTY, L.P., a Delaware limited partnership
By:    Kilroy Realty Corporation, a Maryland corporation, its general partner
By:
 
 
Name:
 
Title:
By:
 
 
Name:
 
Title:



A-2- 2

Note (cont’d)

TERM LOANS AND PAYMENTS OF PRINCIPAL
Date
Amount of Term Loan
Type of Term Loan
Amount of Principal Repaid
Maturity Date
Notation Made By
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


A-2- 3

EXHIBIT A-3
DESIGNATED LENDER NOTE
(Money Market Loans)
$____________
 
 
 
New York, New York
 
 
 
 
[Date]

For value received, KILROY REALTY, L.P., a Delaware limited partnership (the “ Borrower ”) promises to pay to _______________ (the “ Bank ”), for the account of its Applicable Lending Office, the principal sum of _________________ DOLLARS ($_________) or, if less, the aggregate unpaid principal amount of all Money Market Loans made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the Revolving Credit Maturity Date. The Borrower promises to pay interest on the unpaid principal amount of each such Money Market Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Administrative Agent under the Credit Agreement (as defined below).
All Money Market Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Money Market Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.
This Designated Lender Note is one of the Notes referred to in the Second Amended and Restated Credit Agreement, dated as of July 24, 2017, among the Borrower, the Banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Joint Lead Arranger, Joint Bookrunner and as Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and Joint Bookrunner, Wells Fargo Securities, LLC, as Joint Lead Arranger and Joint Bookrunner, PNC Capital Markets LLC, as Joint Lead Arranger, U.S. Bank National Association, as Joint Lead Arranger, and Bank of America, N.A., as Syndication Agent (as the same may be amended from time to time, the “ Credit Agreement ”).

[Signature Page to Follow]


A-3- 1

Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof.
KILROY REALTY, L.P., a Delaware limited partnership
By:    Kilroy Realty Corporation, a Maryland corporation, its general partner
By:
 
 
Name:
 
Title:
By:
 
 
Name:
 
Title:


A-3- 2

Note (cont’d)
MONEY MARKET LOANS AND PAYMENTS OF PRINCIPAL

Date
Amount of Money Market Loan
Type of Money Market Loan
Amount of Principal Repaid
Maturity Date
Notation Made By
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




A-3- 3

EXHIBIT B
Unencumbered Asset Pool Properties (Fee Interests)
3/31/2017

Property
Region
23925 Park Sorrento
LA and Ventura
23975 Park Sorrento
LA and Ventura
24025 Park Sorrento
LA and Ventura
2240 E. Imperial Highway
LA and Ventura
2250 E. Imperial Highway
LA and Ventura
909 Sepulveda Boulevard
LA and Ventura
999 Sepulveda Boulevard
LA and Ventura
1633 26th Street
LA and Ventura
3130 Wilshire Boulevard
LA and Ventura
2829 Townsgate Road
LA and Ventura
12225 El Camino Real
San Diego
12235 El Camino Real
San Diego
12340 El Camino Real
San Diego
12390 El Camino Real
San Diego
12780 El Camino Real
San Diego
12790 El Camino Real
San Diego
3579 Valley Center Drive
San Diego
3611 Valley Center Drive
San Diego
3661 Valley Center Drive
San Diego
3721 Valley Centre Drive
San Diego
3811 Valley Centre Drive
San Diego
13280 Evening Creek Drive South
San Diego
13290 Evening Creek Drive South
San Diego


B- 1

Property
Region
13480 Evening Creek Drive North
San Diego
13500 Evening Creek Drive North
San Diego
13520 Evening Creek Drive North
San Diego
2355 Northside Drive
San Diego
2365 Northside Drive
San Diego
2375 Northside Drive
San Diego
2385 Northside Drive
San Diego
2305 Historic Decatur Road
San Diego
10390 Pacific Center Court
San Diego
10394 Pacific Center Court
San Diego
10398 Pacific Center Court
San Diego
10421 Pacific Center Court
San Diego
10445 Pacific Center Court
San Diego
10455 Pacific Center Court
San Diego
4690 Executive Drive
San Diego
250 Brannan Street
San Francisco
201 Third Street
San Francisco
301 Brannan Street
San Francisco
10220 NE Points Drive
Seattle
10230 NE Points Drive
Seattle
10210 NE Points Drive
Seattle
3933 Lake Washington Blvd NE
Seattle
6255 Sunset Blvd.
LA and Ventura
10900 NE 4th Street
Seattle
599 Mathilda
San Francisco
12233 W. Olympic Boulevard
LA and Ventura
El Segundo 2260 E Imperial Hwy
LA and Ventura



B- 2

Property
Region
360 Third Street
San Francisco
401 Terry
Seattle
505-605 Mathilda
San Francisco
680 and 690 E. Middlefield Road
San Francisco
6121 W. Sunset Blvd- CS Ph1
LA and Ventura
6115 W. Sunset Blvd- CS Ph1
LA and Ventura
333 Brannan
San Francisco
350 Mission Street
San Francisco
1290-1300 Terra Bella
San Francisco
900 Jefferson Avenue (93% Interest)
Redwood City
900 Middlefield Road (93% Interest)
Redwood City
8560 West Sunset Blvd
LA and Ventura
8570 West Sunset Blvd
LA and Ventura
8580 West Sunset Blvd
LA and Ventura
8590 West Sunset Blvd
LA and Ventura
1525 N. Gower St.
LA and Ventura
1575 N. Gower St.
LA and Ventura
12770 El Camino Real
San Diego
1500 N. El Centro Ave.
LA and Ventura
1550 N. El Centro Ave.- Residential
LA and Ventura
100 First Street (56% Interest)
San Francisco
303 Second Street (56% Interest) (1)
San Francisco





(1)  
There is currently a mortgage loan secured by the 303 Second Street property that will mature on 11/3/2017. Borrower shall cause such debt to be paid in full on or prior to 11/3/2017.


B- 3

EXHIBIT C
UNENCUMBERED ASSET POOL PROPERTIES (LEASEHOLD INTERESTS)
03/31/2017
Property
Region
3750 Kilroy Airport Way
LA and Ventura
3760 Kilroy Airport Way
LA and Ventura
3780 Kilroy Airport Way
LA and Ventura
3800 Kilroy Airport Way
LA and Ventura
3880 Kilroy Airport Way
LA and Ventura
3840 Kilroy Airport Way
LA and Ventura
3900 Kilroy Airport Way
LA and Ventura
601 108th Avenue NE
Seattle
1701 Page Mill
San Francisco
3150 Porter Drive
San Francisco
837 N. 34th Street
Seattle
701 N. 34th Street
Seattle
801 N. 34th Street
Seattle


C- 1

REAL PROPERTY SUBJECT TO INTERCOMPANY PLEDGE

Property
Region
501 Santa Monica Boulevard
LA and Ventura
12400 High Bluff Drive
San Diego
4100 Bohannon Drive
San Francisco
4200 Bohannon Drive
San Francisco
4300 Bohannon Drive
San Francisco
4400 Bohannon Drive
San Francisco
4500 Bohannon Drive
San Francisco
4600 Bohannon Drive
San Francisco
4700 Bohannon Drive
San Francisco
331 Fairchild Drive
San Francisco
1310 Chesapeake Terrace
San Francisco
1315 Chesapeake Terrace
San Francisco
1320-1324 Chesapeake Terrace
San Francisco
1325-1327 Chesapeake Terrace
San Francisco


C- 2

EXHIBIT D
FORM OF ASSIGNMENT AND ASSUMPTION
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption (the “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [ Insert name of Assignor ] (the “ Assignor ”) and [ Insert name of Assignee ] (the “ Assignee ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “ Credit Agreement ”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Bank under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Bank) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “ Assigned Interest ”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
1.
Assignor:
 
 
 
 
2.
Assignee:
 
 
 
[and is [a Bank] [an Affiliate of [ identify Bank ] 1 ]
3.
Borrower:
Kilroy Realty, L.P
 
 
 
4.
Administrative Agent:
JPMorgan Chase Bank, N.A., as the administrative agent under the Credit Agreement
_________________________
1  
Select as applicable.

D- 1


5.
Credit Agreement:
The Second Amended and Restated Credit Agreement dated as of July 24, 2017 among Kilroy Realty, L.P., the Banks parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents parties thereto
 
 
 
6.
Assigned Interest:
 
Facility Assigned 2
Aggregate Amount of Commitment/Loans for all Banks
Amount of Commitment/Loans Assigned
Percentage Assigned of Commitment/Loans 3
 
$
$
%
 
$
$
%
 
$
$
%

Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The Assignee, if not already a Bank, agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower, the General Partner and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.
The terms set forth in this Assignment and Assumption are hereby agreed to:
 
 
ASSIGNOR
[NAME OF ASSIGNOR]
 
 
 
 
By:
 
 
 
Title:




 
 
ASSIGNEE
_________________________
2  
Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g., “Revolving Commitment,” “Term Loan Commitment,” etc.)

3  
Set forth, to at least 9 decimals, as a percentage of the applicable Commitment/Loans of all Banks thereunder.

D- 2


 
 
[NAME OF ASSIGNEE]
 
 
 
 
By:
 
 
 
Title:


Consented to and Accepted:
JPMORGAN CHASE BANK, N.A., as
Administrative Agent
By_________________________________
Title:
[Consented to:] 4     
[NAME OF RELEVANT PARTY]
By________________________________
Title:
______________________
4  
To be added only if the consent of the Borrower and/or other parties (e.g. Swingline Lender, Fronting Bank) is required by the terms of the Credit Agreement.

D- 3

ANNEX 1
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties .
1.1 Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and (iv) it is not a Defaulting Bank; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of the Agreement or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under the Credit Agreement.
1.2. Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Bank under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Bank, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Bank thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Bank thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.1 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Bank, and (v) attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Agreement are required to be performed by it as a Bank.
2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute

D- 4

one instrument. Acceptance and adoption of the terms of this Assignment and Assumption by the Assignee and the Assignor by Electronic Signature or delivery of an executed counterpart of a signature page of this Assignment and Assumption by any Electronic System shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.


D- 5

EXHIBIT E
Form of Money Market Quote Request
[Date]
To:
JPMORGAN CHASE BANK, N.A. (the “Administrative Agent”)
From:
Kilroy Realty, L.P. (the “Borrower”)
Re:
Second Amended and Restated Credit Agreement, dated as of July 24, 2017, among the Borrower, the Banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Joint Lead Arranger, Joint Bookrunner and as Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and Joint Bookrunner, Wells Fargo Securities, LLC, as Joint Lead Arranger and Joint Bookrunner, PNC Capital Markets LLC, as Joint Lead Arranger, U.S. Bank National Association, as Joint Lead Arranger, and Bank of America, N.A., as Syndication Agent (as the same may be amended from time to time, the “Credit Agreement”).
We hereby give notice pursuant to Section 2.3 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Loan(s):
Date of Borrowing: __________________
Principal Amount      5          Interest Period 6     
$
Such Money Market Quotes should offer a Money Market [Margin][Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.]

















_______________________
5  
Amount must be $10,000,000 or a larger multiple of $500,000.    

6  
Not less than one month (LIBOR Auction) or not less than 30 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period.

E- 1

The funding of Money Market Loans made in connection with this Money Market Quote Request [may/may not] be made by Designated Lenders.
Terms used herein have the meanings assigned to them in the Credit Agreement.
Kilroy Realty, L.P.
By:    Kilroy Realty Corporation

By:
 
 
Name:
 
Title:
By:
 
 
Name:
 
Title:


E- 2

EXHIBIT F
Form of Invitation for Money Market Quotes
To:
[Name of Bank]
Re:
Invitation for Money Market Quotes to Kilroy Realty, L.P. (the “Borrower”)
Pursuant to Section 2.3 of the Second Amended and Restated Credit Agreement, dated as of July 24, 2017, among the Borrower, the Banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Joint Lead Arranger, Joint Bookrunner and as Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and Joint Bookrunner, Wells Fargo Securities, LLC, as Joint Lead Arranger and Joint Bookrunner, PNC Capital Markets LLC, as Joint Lead Arranger, U.S. Bank National Association, as Joint Lead Arranger, and Bank of America, N.A., as Syndication Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Loan(s):
Date of Borrowing: __________________
Principal Amount              Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin][Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than 10:00 A.M. (New York City time) on [date].

 
 
JPMORGAN CHASE BANK, N.A., as
Administrative Agent
 
 
 
 
By:
 
 
 
Authorized Officer


F- 1

EXHIBIT G
Form of Money Market Quote
To:
JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative
Agent”)

Re:
Money Market Quote to Kilroy Realty, L.P. (the “Borrower”)
In response to your invitation on behalf of the Borrower dated _____________, 20__, we hereby make the following Money Market Quote on the following terms:
1.
Quoting Revolving Credit Bank: ________________________________
2.
Person to contact at quoting Revolving Credit Bank:
_____________________________
3.
Date of Borrowing: ____________________*
4.
We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Principal
Interest
Money Market
 
Amount**
Period***
[Margin****]
[Absolute Rate*****]

$
$
[Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]**
We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Second Amended and Restated Credit Agreement, dated as of July 24, 2017, among the Borrower, the Banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Joint Lead Arranger, Joint Bookrunner and as Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and Joint Bookrunner, Wells Fargo Securities, LLC, as

G- 1

Joint Lead Arranger and Joint Bookrunner, PNC Capital Markets LLC, as Joint Lead Arranger, U.S. Bank National Association, as Joint Lead Arranger, and Bank of America, N.A., as Syndication Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part.

 
 
Very truly yours,
[NAME OF BANK]
Dated:_______________
 
By:____________________________
 
 
Authorized Officer



G- 2

Exhibit H
FORM OF DESIGNATION AGREEMENT
Dated _____________, 201_
Reference is made to that certain Second Amended and Restated Credit Agreement, dated as of July 24, 2017 (the “Credit Agreement”), among the Borrower, the Banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Joint Lead Arranger, Joint Bookrunner and as Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and Joint Bookrunner, Wells Fargo Securities, LLC, as Joint Lead Arranger and Joint Bookrunner, PNC Capital Markets LLC, as Joint Lead Arranger, U.S. Bank National Association, as Joint Lead Arranger, and Bank of America, N.A., as Syndication Agent. Terms defined in the Credit Agreement are used herein with the same meaning.
[NAME OF DESIGNOR] (the “Designor”), [NAME OF DESIGNEE] (the “Designee”) and the Administrative Agent agree as follows:
1. The Designor hereby designates the Designee, and the Designee hereby accepts such designation, to have a right to make Money Market Loans pursuant to Article III of the Credit Agreement. Any assignment by Designor to Designee of its rights to make a Money Market Loan pursuant to such Article III shall be effective at the time of the funding of such Money Market Loan and not before such time.
2. Except as set forth in Section 7 below, the Designor makes no representation or warranty and assumes no responsibility pursuant to this Designation Agreement with respect to (a) any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument and document furnished pursuant thereto and (b) the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto.
3. The Designee (a) confirms that it has received a copy of each Loan Document, together with copies of the financial statements referred to in Articles IV and V of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (b) agrees that it will independently and without reliance upon the Administrative Agent, the Designor or any other Revolving Credit Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under any Loan Document; (c) confirms that it is a Designated Lender; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under any Loan Document as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; and (e) agrees to be bound by each and every provision of each Loan Document and

H- 1

further agrees that it will perform in accordance with their terms all of the obligations which by the terms of any Loan Document are required to be performed by it as a Revolving Credit Bank.
4. The Designee hereby appoints Designor as Designee’s agent and attorney in fact, and grants to Designor an irrevocable power of attorney, to receive payments made for the benefit of Designee under the Credit Agreement, to deliver and receive all communications and notices under the Credit Agreement and the other Loan Documents and to exercise on Designee’s behalf all rights to vote and to grant and make approvals, waivers, consents of amendments to or under the Credit Agreement or other Loan Documents. Any document executed by the Designor on the Designee’s behalf in connection with the Credit Agreement or the other Loan Documents shall be binding on the Designee. The Borrower, the Administrative Agent and each of the Banks may rely on and are beneficiaries of the preceding provisions.
5. Following the execution of this Designation Agreement by the Designor and its Designee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Designation Agreement (the “Effective Date”) shall be the date of acceptance hereof by the Administrative Agent, unless otherwise specified on the signature page thereto.
6. The Administrative Agent hereby agrees that it will not institute against any Designated Lender or join any other Person in instituting against any Designated Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, until the later to occur of (i) one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designated Lender and (ii) the Revolving Credit Maturity Date.
7. The Designor unconditionally agrees to pay or reimburse the Designee and save the Designee harmless against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed or asserted by any of the parties to the Loan Documents against the Designee, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Designee hereunder or thereunder, provided that the Designor shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements if the same results from the Designee’s gross negligence or willful misconduct.
8. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right (subject to the provisions of Section 2.3(b)) to make Money Market Loans as a Revolving Credit Bank pursuant to Section 2.3 of the Credit Agreement and the rights and obligations of a Revolving Credit Bank related thereto; provided , however , that the Designee shall not be required to make payments with respect to such obligations except to the extent of excess cash flow of such Designee which is not otherwise required to repay obligations of such Designated Lender which are then due and payable. Notwithstanding the foregoing, the Designor, as administrative agent for the Designee, shall be and remain obligated to the Borrower and the Revolving Credit Banks for each and every of the obligations of the Designee and its Designor with respect to the Credit Agreement,

H- 2

including, without limitation, any indemnification obligations under Section 7.6 of the Credit Agreement and any sums otherwise payable to the Borrower by the Designee.
9. This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
10. This Designation Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Designation Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Designation Agreement.

H- 3

IN WITNESS WHEREOF, the Designor and the Designee, intending to be legally bound, have caused this Designation Agreement to be executed by their officers thereunto duly authorized as of the date first above written.
Effective Date:    ________________________, 201__
[NAME OF DESIGNOR], as Designor
By:
_____________________
Title:
_____________________
 
 
[NAME OF DESIGNEE] as Designoee
By:
_____________________
Title:
_____________________
 
 
Applicable Lending Office
[ADDRESS]

Accepted this _____ day
of ___________, 201_
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By: _____________________
Title: ___________________


H- 4

EXHIBIT I-1
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Banks That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of July 24, 2017 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Kilroy Realty, L.P., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent, and each Bank from time to time party thereto.
Pursuant to the provisions of Section 8.4(f)(ii)(B)(3) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF BANK]
By:                                                       
 
Name:
 
Title:
Date: ________ __, 201[_]

I- 1

EXHIBIT I-2
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Banks That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of July 24, 2017 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Kilroy Realty, L.P., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent, and each Bank from time to time party thereto.
Pursuant to the provisions of 8.4(f)(ii)(B)(4) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF BANK]
By:                                                       
 
Name:
 
Title:
Date: ________ __, 201[_]


I-2- 1

EXHIBIT I-3
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of July 24, 2017 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Kilroy Realty, L.P., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent, and each Bank from time to time party thereto.
Pursuant to the provisions of 8.4(f)(ii)(B)(4) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Bank with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Bank in writing, and (2) the undersigned shall have at all times furnished such Bank with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
By:                                                       
 
Name:
 
Title:
Date: ________ __, 201[_]

I-3- 1

EXHIBIT I-4
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of July 24, 2017 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Kilroy Realty, L.P., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent, and each Bank from time to time party thereto.
Pursuant to the provisions of 8.4(f)(ii)(B)(4) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Bank with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Bank and (2) the undersigned shall have at all times furnished such Bank with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
By:                                                       
 
Name:
 
Title:
Date: ________ __, 201[_]


I-4- 1

SCHEDULE 1A

LOAN COMMITMENTS

Lender
Revolving Commitment
JPMorgan Chase Bank, N.A.
$62,000,000.00
Bank of America, N.A.
$62,000,000.00
Wells Fargo Bank, National Association
$62,000,000.00
PNC Bank, National Association
$61,000,000.00
U.S. Bank, National Association
$61,000,000.00
Bank of the West
$52,000,000.00
Barclays Bank PLC
$52,000,000.00
Compass Bank
$52,000,000.00
MUFG Union Bank, N.A.
$52,000,000.00
Royal Bank of Canada
$52,000,000.00
Sumitomo Mitsui Banking Corporation
$52,000,000.00
Citibank, N.A.
$32,500,000.00
Comerica Bank
$32,500,000.00
KeyBank, National Association
$32,500,000.00
The Bank of Nova Scotia
$32,500,000.00
TOTAL
$750,000,000


Lender
Term Commitment
JPMorgan Chase Bank, N.A.
$12,000,000.00
Bank of America, N.A.
$12,000,000.00
Wells Fargo Bank, National Association
$12,000,000.00
PNC Bank, National Association
$12,000,000.00
U.S. Bank, National Association
$12,000,000.00
Bank of the West
$10,000,000.00
Barclays Bank PLC
$10,000,000.00
Compass Bank
$10,000,000.00
MUFG Union Bank, N.A.
$10,000,000.00
Royal Bank of Canada
$10,000,000.00
Sumitomo Mitsui Banking Corporation
$10,000,000.00
Citibank, N.A.
$7,500,000.00
Comerica Bank
$7,500,000.00
KeyBank, National Association
$7,500,000.00
The Bank of Nova Scotia
$7,500,000.00
TOTAL
$150,000,000


1A- 1

SCHEDULE 1B

SWINGLINE COMMITMENTS

Lender
Swingline Commitment
JPMorgan Chase Bank, N.A.
$16,666,667
Bank of America, N.A.
$16,666,667
Wells Fargo Bank, N.A.
$16,666,666
TOTAL
$50,000,000

Swingline Lender Notice Information :

Bank of America, N.A.
Felicia Parker
Tel: 980-683-2812
fparker3@bankofamerica.com

JPMorgan Chase Bank, N.A.
500 Stanton Christiana Rd.
NCC5 / 1st Floor
Newark, DE 19713
Attention: Loan & Agency Services Group
Tel: 302-634-4834
Fax: 302-634-4733
Email: ali.zigami@chase.com

Wells Fargo Bank, N.A.
Mary Kjornes
Wells Fargo Bank
CRE Loan Servicing Specialist
600 South 4th Street, 9th Floor
Minneapolis, MN  55415
612-667-7440
866-968-5584
Mary.B.Kjornes@wellsfargo.com

with a copy to:

Kevin Stacker
Wells Fargo Bank
Senior Vice President
1800 Century Park East, 12th Floor
Los Angeles, CA 90067
310-789-3768


1B- 1

Kevin.a.Stacker@wellsfargo.com and
Patty Cabrera - 916-788-4672
pcabrera@wellsfargo.com


1B- 2

SCHEDULE 1C

LETTER OF CREDIT COMMITMENTS

Lender
Letter of Credit Commitment
JPMorgan Chase Bank, N.A.
$16,666,667
Bank of America, N.A.
$16,666,667
Wells Fargo Bank, N.A.
$16,666,666
TOTAL
$50,000,000

Fronting Bank Notice Information :

Bank of America, N.A.
LC request: Scranton_standby_LC@bankofamerica.com
Cc: John Yzeik - Tel: 570-496-9588
Jennifer Whitlock- Tel: 570-496-9586
Late staff (11:30am until 8:00pm ET):
Charles Herron - Tel: 570-496-9564

JPMorgan Chase Bank, N.A.
JPMorgan Chase Bank, N.A.
10420 Highland Manor Dr. 4th Floor
Tampa, FL 33610
Attention: Standby LC Unit
Tel: 800-364-1969
Fax: 856-294-5267
Email: gts.ib.standby@jpmchase.com

With a copy to:

JPMorgan Chase Bank, N.A.
500 Stanton Christiana Rd.
NCC5 / 1st Floor
Newark, DE 19713
Attention: Loan & Agency Services Group
Tel: 302-634-4834
Fax: 302-634-4733
Email: ali.zigami@chase.com


1C- 1

Wells Fargo Bank, N.A.
Kevin Stacker
Wells Fargo Bank
Senior Vice President
1800 Century Park East, 12th Floor
Los Angeles, CA 90067
310-789-3768

Kevin.a.Stacker@wellsfargo.com and
Patty Cabrera - 916-788-4672
pcabrera@wellsfargo.com


1C- 2

SCHEDULE 4.22

LABOR MATTERS

There is a Collective Bargaining Agreement in place between BOMA Greater Los Angeles, Inc. and the International Union of Operating Engineers Local No. 501, AFL-CIO. There are four (4) KRLP employees who are members of the Union and therefore covered by this Agreement.


4.22- 1

SCHEDULE 5.16

Specified Unencumbered Real Property Assets

Property
Region
501 Santa Monica Boulevard
LA and Ventura
12400 High Bluff Drive
San Diego
4100 Bohannon Drive
San Francisco
4200 Bohannon Drive
San Francisco
4300 Bohannon Drive
San Francisco
4400 Bohannon Drive
San Francisco
4500 Bohannon Drive
San Francisco
4600 Bohannon Drive
San Francisco
4700 Bohannon Drive
San Francisco
331 Fairchild Drive
San Francisco
1310 Chesapeake Terrace
San Francisco
1315 Chesapeake Terrace
San Francisco
1320-1324 Chesapeake Terrace
San Francisco
1325-1327 Chesapeake Terrace
San Francisco



SPECIFIED NORGES JV ASSETS

Property
Region
100 First Street (56% Interest)
San Francisco
303 Second Street (56% Interest)
San Francisco


5.16- 1
Exhibit 10.4


SECOND AMENDED AND RESTATED GUARANTY
SECOND AMENDED AND RESTATED GUARANTY (this “ Guaranty ”), made as of July 24, 2017, between KILROY REALTY CORPORATION, a Maryland corporation, having an address at 12200 West Olympic Boulevard, Suite 200, Los Angeles, California 90064 (“ Guarantor ”), and JPMORGAN CHASE BANK, N.A., having an office at 383 Madison Avenue, New York, NY 10179, as administrative agent (the “ Administrative Agent ”) for the banks (the “ Banks ”) listed on the signature pages of the Second Amended and Restated Credit Agreement (as the same may be amended, modified, supplemented or restated, the “ Credit Agreement ”), dated as of the date hereof, among Kilroy Realty, L.P. (“ Borrower ”), the Banks, JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent, Bank, Joint Lead Arranger and Joint Bookrunner, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and Joint Bookrunner, Wells Fargo Securities, LLC., as Joint Lead Arranger and Joint Bookrunner, PNC Capital Markets LLC, as Joint Lead Arranger, U.S. Bank National Association, as Joint Lead Arranger, and Bank of America, N.A., as Syndication Agent.
W I T N E S S E T H :
WHEREAS, Borrower, JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto are parties to an Amended and Restated Credit Agreement dated as of June 23, 2014, as amended to date (the “ Existing Credit Agreement ”);
WHEREAS, in connection with the Existing Credit Agreement, Guarantor entered into that certain Amended and Restated Guaranty dated as of June 23, 2014 (the “ Existing Guaranty ”);
WHEREAS, in connection with the execution and delivery of the Credit Agreement, the parties wish to amend and restate the Existing Guaranty in its entirety; and
WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Credit Agreement.
NOW, THEREFORE, the parties hereto hereby agree to amend and restate the Existing Guaranty in its entirety as follows:
1. Guarantor, on behalf of itself and its successors and assigns, hereby irrevocably, absolutely and unconditionally guarantees the full and punctual payment and for performance when due, whether at stated maturity or otherwise, of all Obligations of Borrower now or hereafter existing under the Credit Agreement and the other Loan Documents, for principal and/or interest as well as any and all other amounts due thereunder, including, without limitation, all indemnity obligations of Borrower thereunder, and any and all reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by the Administrative Agent or the Banks in enforcing its rights under this Guaranty (all of the foregoing obligations being the “ Guaranteed Obligations ”).

2. It is agreed that the Guaranteed Obligations of Guarantor hereunder are primary and this Guaranty shall be enforceable against Guarantor and its successors and assigns without the necessity for any suit or proceeding of any kind or nature whatsoever brought by the



Administrative Agent against Borrower or its respective successors or assigns or any other party or against any security for the payment and performance of the Guaranteed Obligations and without the necessity of any notice of non-payment or non-observance or of any notice of acceptance of this Guaranty or of any notice or demand to which Guarantor might otherwise be entitled (including, without limitation, diligence, presentment, notice of maturity, extension of time, change in nature or form of the Guaranteed Obligations, acceptance of further security, release of further security, imposition or agreement arrived at as to the amount of or the terms of the Guaranteed Obligations, notice of adverse change in Borrower’s financial condition and any other fact which might materially increase the risk to Guarantor), all of which Guarantor hereby expressly waives; and Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be terminated, affected, diminished, modified or impaired by reason of the assertion of or the failure to assert by the Administrative Agent against Borrower or its respective successors or assigns, any of the rights or remedies reserved to the Administrative Agent pursuant to the provisions of the Loan Documents. Guarantor agrees that any notice or directive given at any time to the Administrative Agent which is inconsistent with the waiver in the immediately preceding sentence shall be void and may be ignored by the Administrative Agent, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless the Administrative Agent has specifically agreed otherwise in a writing, signed by a duly authorized officer of the Administrative Agent. Guarantor specifically acknowledges and agrees that the foregoing waivers are of the essence of this transaction and that, but for this Guaranty and such waivers, the Administrative Agent would decline to execute the Loan Documents.

3. Guarantor waives, and covenants and agrees that it will not at any time insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any and all appraisal, valuation, stay, extension, marshaling-of-assets or redemption laws, or right of homestead or other exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by Guarantor of its obligations under, or the enforcement by the Administrative Agent of, this Guaranty. Guarantor further covenants and agrees not to set up or claim any defense, counterclaim, offset, set-off or other objection of any kind to any action, suit or proceeding in law, equity or otherwise, or to any demand or claim that may be instituted or made by the Administrative Agent other than the defense of the actual timely payment and performance by Borrower of the Guaranteed Obligations hereunder; provided, however, that the foregoing shall not be deemed a waiver of Guarantor’s right to assert any compulsory counterclaim, if such counterclaim is compelled under local law or rule of procedure, nor shall the foregoing be deemed a waiver of Guarantor’s right to assert any claim which would constitute a defense, setoff, counterclaim or crossclaim of any nature whatsoever against Administrative Agent or any Bank in any separate action or proceeding. Guarantor represents, warrants and agrees that, as of the date hereof, its obligations under this Guaranty are not subject to any counterclaims, offsets or defenses against the Administrative Agent or any of the Banks of any kind.

4. The provisions of this Guaranty are for the benefit of the Administrative Agent and the Banks and their successors and permitted assigns, and nothing herein contained shall impair as between Borrower and the Administrative Agent and the Banks the obligations of Borrower under the Loan Documents.


2

5. This Guaranty shall be a continuing, unconditional and absolute guaranty and the liability of Guarantor hereunder shall in no way be terminated, affected, modified, impaired or diminished by reason of the happening, from time to time, of any of the following, although without notice or the further consent of Guarantor:

(a) any assignment, amendment, modification or waiver of or change in any of the terms, covenants, conditions or provisions of any of the Guaranteed Obligations or the Loan Documents or the invalidity or unenforceability of any of the foregoing; or

(b) any extension of time that may be granted by the Administrative Agent and/or any Bank to Borrower, any guarantor, or their respective successors or assigns, heirs, executors, administrators or personal representatives; or

(c) any action which the Administrative Agent may take or fail to take under or in respect of any of the Loan Documents or by reason of any waiver or, or failure to enforce any of the rights, remedies, powers or privileges available to the Administrative Agent under this Guaranty or available to the Administrative Agent at law, equity or otherwise, or any action on the part of the Administrative Agent granting indulgence or extension in any form whatsoever; or

(d) any sale, exchange, release, or other disposition of any property pledged, mortgaged or conveyed, or any property in which the Administrative Agent and/or the Banks have been granted a lien or security interest to secure any indebtedness of Borrower to the Administrative Agent and/or the Banks; or

(e) any release of any person or entity who may be liable in any manner for the payment and collection of any amounts owed by Borrower to the Administrative Agent and/or the Banks; or

(f) the application of any sums by whomsoever paid or however realized to any amounts owing by Borrower to the Administrative Agent and/or the Banks under the Loan Documents in such manner as the Administrative Agent shall determine in its sole discretion; or

(g) Borrower’s or any guarantor’s voluntary or involuntary liquidation, dissolution, sale of all or substantially all of their respective assets and liabilities, appointment of a trustee, receiver, liquidator, sequestrator or conservator for all or any part of Borrower’s or Guarantor’s assets, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment, or the commencement of other similar proceedings affecting Borrower or any guarantor or any of the assets of any of them, including, without limitation, (i) the release or discharge of Borrower or any guarantor from the payment and performance of their respective obligations under any of the Loan Documents by operation of law, or (ii) the impairment, limitation or modification of the liability of Borrower or any guarantor in bankruptcy, or of any remedy for the enforcement of the Guaranteed Obligations under any of the Loan Documents, or Guarantor’s liability under this Guaranty, resulting from the operation of

3

any present or future provisions of the Bankruptcy Code or other present or future federal, state or applicable statute or law or from the decision in any court; or

(h) any improper disposition by Borrower of the proceeds of the Loans, it being acknowledged by Guarantor that the Administrative Agent or any Bank shall be entitled to honor any request made by Borrower for a disbursement of such proceeds and that neither the Administrative Agent nor any Bank shall have any obligation to see to the proper disposition by Borrower of such proceeds.

6. Guarantor agrees that if at any time all or any part of any payment at any time received by the Administrative Agent and/or any Bank from Borrower or Guarantor under or with respect to this Guaranty is or must be rescinded or returned by the Administrative Agent or any Bank for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Borrower or Guarantor), then Guarantor’s obligations hereunder shall, to the extent of the payment rescinded or returned, be deemed to have continued in existence notwithstanding such previous receipt by such party, and Guarantor’s obligations hereunder shall continue to be effective or reinstated, as the case may be, as to such payment, as though such previous payment had never been made.

7. Until this Guaranty is terminated pursuant to the terms hereof, Guarantor (i) shall have no right of subrogation against Borrower or any entity comprising same by reason of any payments or acts of performance by Guarantor in compliance with the obligations of Guarantor hereunder; (ii) waives any right to enforce any remedy which Guarantor now or hereafter shall have against Borrower or any entity comprising same by reason of any one or more payment or acts of performance in compliance with the obligations of Guarantor hereunder and (iii) subordinates any liability or indebtedness of Borrower or any entity comprising same now or hereafter held by Guarantor or any affiliate of Guarantor to the obligations of Borrower under the Loan Documents, provided , however , until an Event of Default has occurred and is continuing, Borrower or any entity comprising same shall not be prohibited from making payments to Guarantor or any affiliate thereof on such subordinated liability or indebtedness in accordance with the terms thereof. The foregoing, however, shall not be deemed in any way to limit any rights that Guarantor may have pursuant to the Agreement of Limited Partnership of Borrower or which it may have at law or in equity with respect to any other partners of Borrower.

8. Guarantor represents and warrants to the Administrative Agent and the Banks (with the knowledge that the Administrative Agent and the Banks are relying upon the same) as of the date hereof, as follows:

(a) as of the date hereof, Guarantor is the sole general partner of Borrower;

(b) based upon such relationship, Guarantor has determined that it is in its best interests to enter into this Guaranty;

(c) in the good faith judgment of Guarantor, the benefits to be derived by Guarantor from Borrower’s access to funds made possible by the Loan Documents are at least equal to the obligations undertaken pursuant to this Guaranty;


4

(d) Guarantor is solvent and has corporate power and authority to enter into this Guaranty and to perform its obligations under the term hereof and (i) Guarantor is organized and validly existing under the laws of the State of Maryland, (ii) Guarantor has complied with all provisions of applicable law in connection with all aspects of this Guaranty, and (iii) the persons executing this Guaranty have all the requisite power and authority to execute and deliver this Guaranty;

(e) to the best of Guarantor’s knowledge, there is no action, suit, proceeding, or investigation pending or threatened against or affecting Guarantor at law, in equity, in admiralty or before any arbitrator or any governmental department, commission, board, bureau, agency or instrumentality (domestic or foreign) which is reasonably likely to materially and adversely impair the ability of Guarantor to perform its obligations under this Guaranty;

(f) the execution and delivery of and the performance by Guarantor of its obligations under this Guaranty have been duly authorized by all necessary action on the part of Guarantor and do not (i) violate any provision of any law, rule, regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System of the United States), order, writ, judgment, decree, determination or award presently in effect having applicability to Guarantor or the organizational documents of Guarantor the consequences of which violation is likely to materially and adversely impair the ability of Guarantor to perform its obligations under this Guaranty or (ii) violate or conflict with, result in a breach of or constitute a default under any material indenture, agreement or other instrument to which Guarantor is a party, or by which Guarantor or any of its property is bound the consequences of which violation, conflict, breach or default is reasonably likely to materially and adversely impair the ability of Guarantor to perform its obligations under this Guaranty;

(g) this Guaranty has been duly executed by Guarantor and constitutes the legal, valid and binding obligation of Guarantor, enforceable against it in accordance with its terms except as enforceability may be limited by applicable insolvency, bankruptcy or other laws affecting creditors’ rights generally or general principles of equity, whether such enforceability is considered in a proceeding in equity or at law;

(h) no authorization, consent, approval, license or formal exemption from, nor any filing, declaration or registration with, any Federal, state, local or foreign court, governmental agency or regulatory authority is required in connection with the execution, delivery and performance by Guarantor of this Guaranty, except those which have already been obtained; and

(i) Guarantor is not an “investment company” as that term is defined in, nor is it otherwise subject to regulation under, the Investment Company Act of 1940, as amended.

9. Guarantor and the Administrative Agent each acknowledge and agree that this Guaranty is a guarantee of payment and performance and not of collection and enforcement

5

in respect of any obligations which may accrue to the Administrative Agent and/or the Banks from Borrower under the provisions of any Loan Document.

10. Subject to the terms and conditions of the Credit Agreement, and in conjunction therewith, the Administrative Agent or any Bank may assign any or all of its rights under this Guaranty. In the event of any such assignment, the Administrative Agent shall give Guarantor prompt written notice of same. If the Administrative Agent and/or any Bank elects to sell all the Loans or participations in the Loans and the Loan Documents, including this Guaranty, the Administrative Agent or any Bank may forward to each purchaser and prospective purchaser all documents and information relating to this Guaranty or to Guarantor, whether furnished by Borrower or Guarantor or otherwise, subject to the terms and conditions of the Credit Agreement.

11. Guarantor agrees, upon the written request of the Administrative Agent, to execute and deliver to the Administrative Agent, from time to time, any modification or amendment hereto or any additional instruments or documents reasonably considered necessary by the Administrative Agent or its counsel to cause this Guaranty to be, become or remain valid and effective in accordance with its terms, provided, that any such modification, amendment, additional instrument or document shall not increase Guarantor’s obligation’s or diminish its rights hereunder and shall be reasonably satisfactory as to form to Guarantor and to Guarantor’s counsel.

12. The representations and warranties of Guarantor set forth in this Guaranty shall survive until this Guaranty shall terminate in accordance with the terms hereof.

13. This Guaranty contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements relating to such subject matter and may not be modified, amended, supplemented or discharged except by a written agreement signed by Guarantor and the Administrative Agent.

14. If all or any portion of any provision contained in this Guaranty shall be determined to be invalid, illegal or unenforceable in any respect for any reason, such provision or portion thereof shall be deemed stricken and severed from this Guaranty and the remaining provisions and portions thereof shall continue in full force and effect.

15. This Guaranty may be executed in counterparts which together shall constitute the same instrument. Delivery of an executed counterpart of this Guaranty by telecopy or other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Guaranty.

16. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, facsimile transmission followed by telephonic confirmation or similar writing) and shall be, addressed to such party at the address set forth below or to such other address as may be identified by any party in a written notice to the others:

If to Guarantor:
Kilroy Realty Corporation
12200 West Olympic Boulevard, Suite 200
Los Angeles, California 90064

6

Attn: Tyler Rose and Michelle Ngo
Telecopy: (310) 481-6580

With Copies of
Notices to
Guarantor to:
Latham & Watkins LLP
355 South Grand Avenue
Los Angeles, California 90071
Attn: Glen B. Collyer, Esq.
Telecopy: (213) 891-8763

If to the Administrative
Agent:
JPMorgan Chase Bank, N.A.
251 S. Lake Avenue, Suite 900
Pasadena, CA 91101
Attn: Nadeige Dang
Telecopy number: (626) 432-3958

With Copies of
Notices to the
Administrative
Agent to:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Road, Ops 2
Newark, DE 19713
Attn: Loan and Agency Services
Telecopy number: (302) 634-4733

and to:
Morgan, Lewis & Bockius LLP
1 Federal Street
Boston, Massachusetts 02110
Attn: Stephen Miklus, Esq.
Telecopy: (617) 341-7701

Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when such facsimile is transmitted to the facsimile number specified in this Section and the appropriate answerback or facsimile confirmation is received, (ii) if given by certified registered mail, return receipt requested, with first class postage prepaid, addressed as aforesaid, upon receipt or refusal to accept delivery, (iii) if given by a nationally recognized overnight carrier, 24 hours after such communication is deposited with such carrier with postage prepaid for next day delivery, or (iv) if given by any other means, when delivered at the address specified in this Section.
17. Any acknowledgment or new promise, whether by payment of principal or interest or otherwise by Borrower or Guarantor, with respect to the Guaranteed Obligations shall, if the statute of limitations in favor of Guarantor against the Administrative Agent shall have

7

commenced to run, toll the running of such statute of limitations, and if the period of such statute of limitations shall have expired, prevent the operation of such statute of limitations.

18. This Guaranty shall be binding upon Guarantor and its successors and assigns and shall inure to the benefit of the Administrative Agent and the Banks and their successors and permitted assigns; provided that the Guarantor may not assign or transfer its rights or obligations under this Guaranty.
  
19. The failure of the Administrative Agent to enforce any right or remedy hereunder, or promptly to enforce any such right or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel against the Administrative Agent, nor excuse Guarantor from its obligations hereunder. Any waiver of any such right or remedy to be enforceable against the Administrative Agent must be expressly set forth in a writing signed by the Administrative Agent.

20. (a)    THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

(b) Any legal action or proceeding with respect to this Guaranty and any action for enforcement of any judgment in respect thereof may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Guaranty, the Guarantor hereby accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and appellate courts from any thereof. The Guarantor irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Guarantor at its address for notices set forth herein. The Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty brought in the courts referred to above and hereby further irrevocably waives, to the fullest extent permitted by law, and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of the Administrative Agent to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Guarantor in any other jurisdiction.

(c) GUARANTOR HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY AND ALL CLAIMS OR CAUSES OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. IT IS HEREBY ACKNOWLEDGED BY GUARANTOR THAT THE WAIVER OF A JURY TRIAL IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT TO ACCEPT THIS GUARANTY AND THAT THE LOANS MADE BY THE BANKS ARE MADE IN RELIANCE UPON SUCH WAIVER. GUARANTOR FURTHER WARRANTS AND REPRESENTS THAT SUCH WAIVER HAS BEEN KNOWINGLY AND VOLUNTARILY MADE, FOLLOWING CONSULTATION WITH LEGAL

8

COUNSEL. IN THE EVENT OF LITIGATION, THIS GUARANTY MAY BE FILED BY THE ADMINISTRATIVE AGENT IN COURT AS A WRITTEN CONSENT TO A NON-JURY TRIAL.

(d) Guarantor does hereby further covenant and agree to and with the Administrative Agent that Guarantor may be joined in any action against Borrower in connection with the Loan Documents and that recovery may be had against Guarantor in such action or in any independent action against Guarantor (with respect to the Guaranteed Obligations), without the Administrative Agent first pursuing or exhausting any remedy or claim against Borrower or its successors or assigns. Guarantor also agrees that, in an action brought with respect to the Guaranteed Obligations in any jurisdiction, it shall be conclusively bound by the judgment in any such action by the Administrative Agent (wherever brought) against Borrower or its successors or assigns, as if Guarantor were a party to such action, even though Guarantor was not joined as parties in such action.

(e) Guarantor agrees to pay all reasonable expenses (including, without limitation, attorneys’ fees and disbursements) which may be incurred by the Administrative Agent or the Banks in connection with the enforcement of their rights under this Guaranty, whether or not suit is initiated.

21. Notwithstanding anything to the contrary contained herein, this Guaranty shall terminate and be of no further force or effect upon the full performance and payment of the Guaranteed Obligations hereunder, subject to the provisions of Section 6 hereof. Upon termination of this Guaranty in accordance with the terms of this Guaranty, the Administrative Agent promptly shall deliver to Guarantor such documents as Guarantor or Guarantor’s counsel reasonably may request in order to evidence such termination.

22. All of the Administrative Agent’s rights and remedies under each of the Loan Documents or under this Guaranty are intended to be distinct, separate and cumulative and no such right or remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any other right or remedy available to the Administrative Agent.

23. This Guaranty supersedes and replaces the Existing Guaranty in its entirety.

[ Signature Pages to Follow ]


9

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Guaranty as of the date and year first above written.
 
 
GUARANTOR:
 
 
 
 
 
KILROY REALTY CORPORATION
 
 
 
 
 
 
 
By:
/s/ Heidi R. Roth
 
 
Name: Heidi R. Roth
Title:   Executive Vice President, Chief Accounting Officer, Controller and Assistant Secretary
 
 
 
 
By:
/s/ Michelle Ngo
 
 
Name: Michelle Ngo
Title:   Senior Vice President and Treasurer


[Signature Page to Second Amended and Restated Guaranty]



ACCEPTED:
 
 
  

JPMORGAN CHASE BANK, N.A.


as Administrative Agent
 
 
By:
/s/ Nadeige Dang
 
Name: Nadeige Dang
Title: Vice President



[Signature Page to Second Amended and Restated Guaranty]

ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.


STATE OF CALIFORNIA     )    
)    
COUNTY OF LOS ANGELES     )

On ___ July 18_ _____, 20 17 , before me, _ _YuSon Shin_ _________, a Notary Public, personally appeared ____Heidi R. Roth and Michelle Ngo___ ___, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she /they executed the same in his/her/their authorized capacity(ies), and that by his/her /their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
 
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.
_/s/ YuSon Shin_ ____________
Signature of the Notary Public


Exhibit 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John Kilroy, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ John Kilroy
John Kilroy
President and Chief Executive Officer
Date: July 27, 2017



Exhibit 31.2

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Tyler H. Rose, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Tyler H. Rose
Tyler H. Rose
Executive Vice President and
Chief Financial Officer
Date: July 27, 2017



Exhibit 31.3

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John Kilroy, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ John Kilroy
John Kilroy
President and Chief Executive Officer
Kilroy Realty Corporation, sole general partner of
  Kilroy Realty, L.P.
Date: July 27, 2017



Exhibit 31.4

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Tyler H. Rose, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Tyler H. Rose
Tyler H. Rose
Executive Vice President and
Chief Financial Officer
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
Date: July 27, 2017



Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Kilroy Realty Corporation (the “Company”) hereby certifies, to his knowledge, that:

(i)
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John Kilroy
John Kilroy
President and Chief Executive Officer
 
 
Date:
July 27, 2017

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, is not being filed as part of the Report or as a separate disclosure document, and is not being incorporated by reference into any filing of the Company or Kilroy Realty, L.P. under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, (whether made before or after the date of the Report) irrespective of any general incorporation language contained in such filing. The signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 32.2


Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Kilroy Realty Corporation (the “Company”) hereby certifies, to his knowledge, that:

(i)
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Tyler H. Rose
Tyler H. Rose
Executive Vice President and
Chief Financial Officer
 
 
Date:
July 27, 2017

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, is not being filed as part of the Report or as a separate disclosure document, and is not being incorporated by reference into any filing of the Company or Kilroy Realty, L.P. under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, (whether made before or after the date of the Report) irrespective of any general incorporation language contained in such filing. The signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 32.3


Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Kilroy Realty Corporation, the sole general partner of Kilroy Realty, L.P. (the “Operating Partnership”), hereby certifies, to his knowledge, that:

(i)
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended June 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.

/s/ John Kilroy
John Kilroy
President and Chief Executive Officer
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
 
 
Date:
July 27, 2017

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, is not being filed as part of the Report or as a separate disclosure document, and is not being incorporated by reference into any filing of Kilroy Realty Corporation or the Operating Partnership under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, (whether made before or after the date of the Report) irrespective of any general incorporation language contained in such filing. The signed original of this written statement required by Section 906 has been provided to the Operating Partnership and will be retained by the Operating Partnership and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 32.4


Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Kilroy Realty Corporation, the sole general partner of Kilroy Realty, L.P. (the "Operating Partnership"), hereby certifies, to his knowledge, that:

(i)
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended June 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.

/s/ Tyler H. Rose
Tyler H. Rose
Executive Vice President and
Chief Financial Officer
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
 
 
Date:
July 27, 2017

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, is not being filed as part of the Report or as a separate disclosure document, and is not being incorporated by reference into any filing of Kilroy Realty Corporation or the Operating Partnership under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, (whether made before or after the date of the Report) irrespective of any general incorporation language contained in such filing. The signed original of this written statement required by Section 906 has been provided to the Operating Partnership and will be retained by the Operating Partnership and furnished to the Securities and Exchange Commission or its staff upon request.